Appendix — Marathon Oil Co. v. Federal Energy Administration
Supreme Court brief1976
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13643-3.76
IN THE
Supreme Court of the United States
Octoper Term, 1975
No. 75— 1259 :
Maratuon Or Company, Petitioner
v.
FeperaL Enercy ADMINISTRATION; F'RanK G. Zarns, Admin-
istrator, Federal Energy Administration; and Asu-
LAND Orn JInc., Respondents
APPENDIX TO PETITION FOR A WRIT OF
CERTIORARI TO THE TEMPORARY EMERGENCY
COURT OF APPEALS OF THE UNITED STATES
Grorce Biow,
JOHN OBERDORFER,
JoHN Epwarp WILLIAMS,
1200 17th Street, N.W.
Washington, D.C. 20036
Kent B. Hampron
J. Furman Lewis,
MaratHon Or Company
539 South Main Street
Of Counsel, Findlay, Ohio 45840
Rautpx S. Spritzer, Attorneys for Petitioner,
3400 Chestnut Street Marathon Ou Company
Philadelphia, Pennsylvania
19174
— _ — —— ene,
Press or Byron S. ADAMS PRINTING, INC., WASHINGTON, D. C.
gee a en nti o
“aa, jaw
2. OPE erg
ral
TABLE OF CONTENTS OF APPENDIX
Page
Per Curiam Order of the Temporary Emergency Court
GE BOUORED CHG. Bin DOGG! ccccccccccccscescess la
Order of TECA Staying Mandate (Feb. 27, 1976) .... 2a
Opinion and Grover of the District Court (Aug. 29,
1975)
Opinion of TECA Denying the Appeal from the Dis-
trict Court’s Denial of the Motion for Prelimi-
nary Injunction (Apr. 21, 1975) ................ ba
Memorandum and Order of District Court Denying
the Motion for Preliminary Injunction (Jan. 31,
SPUD 660-660 6905 babaecndendescerecdcncececeste 27a
a TIEROUE -6.6.i.0 cine cnecececacdesecedeesss 46a
Se Ge EE ic ccdccedn cdntecnesseeuecva 46a
SP Sey ID on 6-600:5.06.0660000600b0s'eee 48a
10 C.F.R. § 211.67 (Dec. 4, 1974) .........00.. 50a
Directive of January 10, 1975 ............4.. d7a
10 C.F.R. § 211.67, as amended by 39 Fed. Reg.
44710, 40 Fed. Reg. 6768, 10445, 13303, 14738,
DMT sac cdduns ghucedss veeesiesuneen 74a
Opinion of TECA in Cities Service Co. v. FEA, No.
DC-34 (TECA Dee. 31, 1975) .......ccscccvvees 83a
Order of TECA Denying Petition for Rehearing in
EL Bs EP onc becnne coneeedecsteseczsess 105a
Order of TECA Denying Suggestion for Rehearing En
Banc in TECA No. DC-34 .....ccecccevcvseces 106a
Opinion of TECA in Pasco, Inc. v. FEA, No. 10-7
gp 8 Be Pree eer 107a
TABLE OF CONTENTS OF APPENDIX
Per Curiam Order of the Temporary Emergency Court
of Appeals (Feb. 17, 1976) .......cccccsccseess la
Order of TECA Staying Mandate (Feb. 27, 1976) .... 2a
Opinion and Order of the District “ourt (Aug. 29,
Opinion of TECA Denying the Appeal from the Dis
trict Court’s Denial of the Motien for Prelimi-
nary Injunction (Apr. 21, 1975) ............8.. ba
Memorandum and Order of District Court Denying
the Motion for Preliminary Injunction (Jan. 31,
Ges as er ists oe el ee ae ea a 27a
I<" a el ee 46a
Sy Ge ee oe ee bee ee tOa
a rr ee ee eee ed tSa
10 C.F.R. § 211.67 (Dee. 4, 1974) .......... _, 5Oa
Directive of January 10, 1975 ..........00 0. ova
1O CLELR. § 211.67, as amended by 39 Fed. Reg.
$4710, 40 Fed. Reg, 6768, 10445, 13503, 14738,
a TE, . 04646506600600000buRE OD 74a
Opinion of TECA in Cities Service Co, v. FEA, No.
ok He, +) 2 | ree 83a
Order of TECA Denying Petition for Rehearing in
TECA No, DC-34 PTT TUT TCO TT CT eT 105a
Order of TECA Denying Suggestion for Rehearing En
Bane in TECA No. DC BE tad in 0 hee es een ee 106a
Opinion of TECA in Paseo, Inc. v. FEA, No. 10-7
ys oe BR 0 re Pe rere LO7a
la
APPENDIX
OPINIONS BELOW
TEMPORARY EMERGENCY COURT OF APPEALS
OF THE UNITED STATES
No. 6.10
Maratnon Ow Company, Plaintiff-A ppellant,
v.
FeveraL Enercy ADMINISTRATION, et al.,
ay, fe ndants Appe iia 4
(Finep Fesrvary 17, 1976)
Before Curistensen, Van Oosternour and ILAastinas,
Judges.
Per CURIAM,
Upon stipulation of the parties, briefiing and the filing
of the record on appeal in this case on September 18, 1975,
was stayed pending this court’s decisions in No, 10-7,
Paseo, Ine. v. FHA, and No, DC-34, Cities Services tom
pany, et al. v. FEA. The latter cases vave now been decided
by this court.
A motion to affirm has been filed by the appellees pur-
suant to TECA Rule 26, and within an extension of time
allowed by the court for this purpose,
Appellant’s opposition to this motion is based on the
contention that Pasco and Cittes Service Company were
improperly decided. The validity of these decisions will not
be re-examined here,
Cities Service Company, vy. FEA, 2
(ThCA Dee, ol, 1975) (petition for re hearme and SuyvYyCs
tion for rehearing en bane denied January 28, 1976), and
Pasco, Inc. v. FEA, 525 F.2d 1891 (TECA Oct, 14, 1975),
are dispositive as against all of the contentions of appel
lant.
Accordingly, the motion to affirm is hereby granted.
AFFIRMED.
Dated this 17th day of February, 1976.
2a
TEMPORARY EMERGENCY COURT OF APPEALS
OF THE UNITED STATES
Brerore Jvupces Curistensex, Van OosTeRHOUT AND
Hastinos
No. 6-10
Maratnon Or Company, Plaintiff-Appellant,
v.
FeveraL Enercy ApMINISTRATION, et al.,
Defendants-A ppellees,
and
AsuLaxn Ow, Ixc., Intervenor-A ppellee
and
INDEPENDENT Reriners ASsociaTiION OF AMERICA,
Amicus Curiae.
Upon consideration of Appellant’s Motion for Stay of
Mandate and Memorandum of Points and Authorities in
Support thereof,
Ir is oRDERED that said motion is GRANTED.
FOR THE COURT:
Ruru H. Jacosson
Clerk
/s/ by Donna M. Botp
Donna M. Bold
Chief Deputy Clerk
February 2/, 1976
+a
3a
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
No. C 75-36
Maratuon Ow Company, Plaintiff,
Vs.
FreperaL Enercy ApMINistraTion, and Frank Zaxs,
Administrator, Defendants,
—and—
AsuLanp Om, Ixe., and INpereNDENT REFINERS
Association, Intervenors.
OPINION AND ORDER
WaALinskI, J:
Marathon Oil Company once again brings before this
Court the question of the federal government’s power to
regulate the petroleum industry and once again asks this
‘ourt to enjoin the Federal Energy Administration’s
‘*Mintitlements’’?’ Program. Specifically, this time Mara-
thon asks this Court, by way of a motion for a temporary
restraining order and preliminary injunction, to save
Marathon from having to make ‘‘entitlements’’ purchases
totalling $11.6 Million before August 31, 1975. For the
reasons which hereafter appear the Court has concluded
that such relief would not be appropriate and will deny
the motions.
Marathon initially brought this suit last January, 1975,
when the FEA’s entitlements, or Cost Equalization, pro-
gram was just aborning requesting the same kind of relief.
The Court then held a hearing, received evidence, and en-
tered Findings of Fact and Conelusions of Law which de-
nied any relief. The Court further declined to certify a
da
constitutional question to the Temporary Emergency
Court of Appeals. That Court turned aside an appeal,
holding that it did not then have jurisdiction to entertain
one,
Now it appears that the entitlements program may
come to an end, The Emergency Petroleum Allocation Act
of 1973, 15 U.S.C., § 751 ef seq., is due to expire on August
31, 1975. While Congress has passed an extension of the
Act, reports in the various media of the press indicate that
the President will veto the extension. Even as this is
being written, news reports continue so to proclaim while
also reporting that the Senate Majority Leader will today
call on the President to urge extending the Act. Intrepid
as reporters are, it is difficult now for this Court to con-
clude as a matter of fact and law that the Act will indeed
expire on Sunday on the basis of this ‘‘evidence.’’ How-
ever, in the interest of justice, the Court will so presume
and consider Marathon’s claims.
The Court will make the following factual findings, in-
corporating, insofar as they are applicable, the Findings
of Fact made by this Court on January 31, 1975:
The evidence shows that the entitlements pur-
chase requirements for /ugust are based on crude
oil refinery runs in June, 1975, thereby evidencing a
two-month lag between actual erude runs and en-
titlements purchases. 40 Fed. Reg. 36096 (Aug. 18,
1975).
Weighing the affdavits of Nicholson and Smith
offered in evidence by the parties, and received by
the Court, the facts are that Marathon has been able
to recoup nearly all of its past entitlements purchases.
According to the Nicholson statement, even at its
worst, Marathon has recovered at least two-thirds of
such costs by way of the pass-through provision.
Based on this evidence, the Court concludes as a fac-
da
tual matter that Marathon has not shown any irre-
parable injury.
Turning to legal conclusions, it is clear that Marathon
must show the presence of irreparable injury, the absence
of an adequate remedy at law, and the likelihood of suc-
cess on the merits. Beacon Theatres v. Westover, 359 U.S.
500, 506-07 (1959). Not only has Marathon failed to show
irreparable injury, but there is little or no likelihood of
success on the meriis in the opinion of this Court. Since
the January 3lst order, several other court have passed
on the same claims as Marathon has raised against this
same program and have decided them in favor of the gov-
ernment. See, e.g., Gulf Oil Corp. v. Federal Energy Ad-
min., 391 F. Supp. 858, 862-4 (W.D. Pa. 1975). Accordingly,
the Court will deny all injunctive relief.
Marathon also asks this Court to certify a substancial
constitutional question to the Court of Appeals. As in
January, the Court declines to do so. See cases cited
Order January 31, 1975, at pages 21-2.
Pursuant to Rule 65(a)(2), Federal Rules of Civil Pro-
cedure, trial on the merits is hereby consolidated with the
hearing on the motion for a preliminary injunction. The
motions for a temporary restraining order, for a prelim-
inary injunction, and for certification of the constitutional
question are denied. Final judgment shall be entered in
favor of defendants on all isues.
It Is So Ornperep.
/s/ Nicnoias J. WALINSKY
United States District Judge
6a
TEMPORARY EMERGENCY COURT OF APPEALS
OF THE UNITED STATES
Exxon CORPORATION, Plaintiff-A ppe llant,
Av Hoc Com™iTTert to Save Smauu ReErFiners,
Amicus Curiae.
v.
F'eperaL ENerGy ADMINISTRATION and Frank G. Zar.
De fe ndants-A pp lle PS
ASHLAND Orn, Inc... Interve nor-A ppellee,
and
INDEPENDENT Reriners AssociaTION or AMERICA,
Inte rvenor A ppe li é.
Appeal from the United States District Court
for the District of New Jersey
(No. Civ. 75-150)
No. 6-8
MaratHon Or Company, Plaintiff-A ppellant,
Av Hoc Comm™irtre To Save Smauut Reriners.
Amicus Curias
;
V J
FeperaL Exercy ADMINISTRATION and Frank G. Zarp,
Administrator. Di Te ndants A pp lhe es,
fand
ia
ASHLAND OIL, INc.. Inte rvenor A ppe llee .
and
INDEPENDENT Reriners AsSOCIATION OF AMERICA,
Inte rrenor A ppe lle Cc.
Lone Istanp Licutine Company, Pusuic Service Evectric
AND Gas Company, and Conso._ipaTep EKptson ComMPpANY
oF New York, Amicus Curiae.
Appeal from the United States District Court
for the Northern District of Ohio
(No. 75-36)
(F'rrep Apri 21, 1975)
Wittum H. Auuex, with whom John A. Hodges of Cov
ington & Burling and Robert L. Norris, Jr., were on
ihe brief for Plaintiff-Appellant Exxon Corporation.
Joseph A. Califano, Jr., with whom Jerry L. Shulman and
Peter B. Hamilton of Williams, Connolly & Califano
were on the brief as Amicus Curiae Ad Hoe (‘om-
mittee to Save Small Refiners.
Patricia N. Buiarre, Attorney, Dept. ef Justice, with whom
Carla A. Hills, Asst. Atty. Gen. and Stanley D. Rose,
Atty., Dept. of Justice were on the brief, for Defend-
ant-Appellees.
Frep W. Drocuna, with whom David Ginsburg and Peter
H. Rodgers of Ginsburg, Feldman and Bress; and
Arloe W. Mayne, of Counsel, were on the brief, for
Intervenor-Appellee Ashland Oil, Ine.
Edwin Jason Dryer for Intervenor-Appellee Independent
Refiners Association of America.
Sa
Grorce Brow, with whom Kent B. Hampton, Gen. Coun-
sel; John L. Oberdorfer, Gail F. Borden of Patton,
Boggs & Blow; and Ralph S. Spritzer, of Counsel,
were on the brief for Plaintiff-Appellant Marathon
Oil Company.
Josepn A. Catirano, Jr., with whom Jerry L. Shulman
and Peter B. Hamilton of Williams, Connolly & Cali-
fano were on the brief, as Amicus Curiae Ad Hoe
Committee to Save Small Refiners.
Patricia N. Buarr, Atty. Dept. of Justice, with whom
Carla A. Hills, Asst. Atty. Gen. and Stanley D. “ose,
Atty. Dept. of Justice, were on the brief for Defencd-
ants-Appellees.
Frep W. Drocuia, with whom David Ginsburg and Peter
H. Rodgers of Ginsburg, Feldman and Bress were on
the brief, for Intervenor-Appellee Ashland Oil, Ine.
Epwin Jason Dryer for Intervenor-Appellee Independent
Refiners Association of America.
John J. Adams, with whom Arnold H. Quint of Hunton,
Williams, Gay & Gibson, Washington, D.C.; George
C,. Freeman, Jr. and Allen C. Barringer of Hunton,
Williams, Gay & Gibson, Richmond, Va., were on the
brief, for Amicus Curiae Long Island Lighting Com-
pany, Public Service Electric and Gas Company and
Consolidated Edison Company of New York, Ine.
3efore: Hastre, Curistensen and Hastines, Judges.
Opinion for the Court filed by Judge Christensen.
Dissenting opinion filed by Judge Hastings.
CuristenstN, Judge: To reach the merits of these ap-
peals involving denial of applications for preliminary in-
junctions below, we again would have to surmount a juris-
9a
dictional obstacle already recognized with reference to the
absence of certification under 28 U.S.C, § 1292(b).’
Both of the above-entitled cases now before us involve
here the same jurisdictional problem and essentially the
same issues on the merits. Each appellant has asked us
to grant an injunction pending appeal—in the case of
Marathon ‘‘during the pendency of said appeal’’ and in the
ease of Exxon ‘‘ pending its appeal’’. Otherwise, there has
been filed directly with us no application for an injunc-
tion either preliminary or permanent, nor have the trial
courts certified here any constitutional issues or interlocu-
tory appeals.
Appellants are seeking to review orders of district
courts denying motions for preliminary injunction and to
certify a substantial constitutional question with refer-
ence to the ‘‘entitlement program’’ of the Federal Energy
Administration.’
The jurisdictional problem arises from § 211(d)(2) of
the Economie Stabilization Act of 1970, as amended, 12
U.S.C.A. § 1904 (1975 Supp.) [incorporated into the
Emergency Petroleum Allocation Act of 1973, Pub. L. No.
93-159, 87 Stat. 627 by its See. 5(a) (1)]:
‘Condor Operating Co. v. Sawhill, F.2d ——, (T.E.C.A.
Nos. 5-10, 5-11, Feb. 7, 1975). ‘‘The purported appeal by the de-
fendants from the order in question does not ameliorate the prob-
lem. They [the appellants} had no appeal as of right from the
interlocutory order [granting a preliminary injunction]; they
had obtained from the district court no certification for the usual
interlocutory appeal, nor had they filed application with this court
for leave to so appeal within the time preseribed by § 211(d) (2)
of the Economic Stabilization Act with reference to 28 U.S.C.
§ 1292(b). . . .”’ We held in that case, however, that certification
of a constitutional issue by the trial court, not present in the case
at bar, invested us with jurisdiction to consider related problems.
*39 Fed. Reg. 42246 (Dec. 4, 1974) as amended 39 Fed. Reg.
44710 (Dee. 27, 1974). 40 Fed. Reg. 2559 (Jan. 13, 1975).
10a
‘*(2) A district court of the United States or the
Temporary Emergency Court of Appeals may enjoin
temporarily or permanently the application of a par-
ticular regulation or order issued under this title to
a person who is a party to litigation before it. Ap-
peals from interlocutory decisions by a district court
of the United States under this paragraph may be
taken in accordance with the provisions of section
1292(b) of title 28, United States Code; except that
reference in such section to the courts of appeals
shall be deemed to refer to the Temporary Emer-
gency Court of Appeals.’’
While subdivision (a) of the section thus referred to, upon
which the appeals appear premised, provides for appeals
as of right from orders granting or denying interlocutory
injunctions, subdivision (b) to which the authorization for
appeals from such orders are expressly limited by the
Economie Stabilization Act as we have seen, reads as
follows:
‘‘When a district judge, in making a civil action an
order not otherwise appealable under this section,
shall be of the opinion that such order involves a con.
trolling question of law as to which there is sub-
stantial ground for difference of opinion and that an
immediate appeal from the order may materially ad-
vance the ultimate termination of the litigation, he
shall so state in writing in such order. The Court of
Appeals may thereupon, in its discretion, permit an
appeal to be taken from such order, if application is
made to it within ten days after the entry of the
order: Provided, however, That application for an ap-
peal hereunder shall not stay proceedings in the dis-
trict court unless the district judge or the Court of
Appeals of a judge thereof shall so order.’’
lla
To read § 211(d)(2) of the Economie Stabilization Act
with reference to our jurisdiction on appeal to mean that
appeals from interlocutory orders denying or granting
injunctions may be taken ‘‘in accordance with the provi-
sions of section 1292({a) ...’’ rather than, or in addition
to, ‘‘the provisions of section 1292(b) .”’ would do
violence to the language of our jurisdictional charter. The
two subdivisions were designed to reach different subject
matters; one does not lend itself to an interpretation that
includes the other, for that would ‘‘effeectively turn 1292
upon its head’’. Cf. Tidewater Oil Co. v. United States,
409 U.S. 151 (1972).
The meaning being so facially clear, to seek qualifica-
tions or reversal through contextual implications or legis-
lative history seems somewhat gratuitous. Yet both sup-
port acceptance of the plain meaning of the employed
language.
Vhen the Economie Stabilization Act of 1970 (Pub. L.
No, 91-379) was adopted originally no provisions relating
to judicial review were specified. Thus, apart from final
judgments, any interlocutory orders that district courts
might have granted within the parameters of the Adminis-
trative Procedure Act and the Rules of Civil Procedure,
were reviewable in courts of appeal under §¢ 1292—if
granting or denying a preliminary injunction, by appeal
as of right by virtue of its subsection (a); and as to any
other interlocutory order upon certification below and
within the discretion of the appellate court as permitted
by its subsection (b).
Section 211 of the Act, specifically providing for, and
regulating, judicial review, was added by the Economie
Stabilization Act Amendments of 1971 (Pub. L. No. 92-
210). The 1973 amendments to the statutes did not change
this section.
l2a
The precursor of Section 211 was a bill sent by the
President to Congress as a part of a message following
the announcement of Phase II to extend and amend the
Economic Stabilization Act of 1970. The proposal for the
creation of the Temporary Emergency Court of Appeals
of the United States was that it should ‘‘have the powers
of a cirenit court of appeals with respect to the jurisdic-
tion conferred on it by this title except that the court shall
not have power to issue any interlocutory decree staying
or restraining, in whole or in part, any provision of this
title, or the effectiveness of any regulation or order issued
thereunder.’? The bill would have provided for the cer-
tification of constitutional questions to this court by dis-
trict courts but would have precluded district courts from
granting even permanent injunctions, which would have to
be isued by the Temporary Emergency Court of Appeals
upon appeal from final declaratory judgments or after
hearing in this court upon recommendation of a district
judge, or by the Supreme Court.
After holding hearings on the administration bill, the
Senate Banking Committee reported a clean bill, S. 2891,
which contained the precise language later enacted as
Section 211. The explanation contained in the Senate Com-
mittee report included the following comments (U.S. Code
Cong. & Ad. News pp. 2292-4):
‘‘The judicial review provision has been written
with several important principles in mind: (1) speed
and consistency of decisions in cases arising under
the Act, (2) avoidance of any breaks or stays in the
operation of the Stabilization Program, and (3) relief
for particular persons aggrieved by the operation of
the program.
‘*A preliminary limitation is set upon the power of
this new court. It may issue, with one exception, no
l3a
interlocutory or temporary order staying or restrain-
ing in whole or in part any provision of the Act or the
effectiveness of any regulation or order issued pur-
suant to the Act. The sole exception is that it may
issue a temporary injunction restraining the applica-
tion of a particular regulation or order to a person
who is a party to litigation before it. In all other re-
spects the Temporary Emergency Court of Appeals
shall have all the powers of a circuit court of appeals.’’
The Senate Committee’s report also states, inter alia:
‘*Several subsections are devoted to making explicit,
the precise authority and limitations on authority that
are being placed on the courts considering cases and
controversies arising under this Act and in reviewing
the decisions of lower courts in these matters.
‘*In order to provide relief for a particular person
who may be aggrieved by the operation of this program
during the period in which he is attempting to establish
his legal position, a district court or the Temporary
Emergency Court of Appeals may enjoin temporarily
or permanently the application of a particular regula-
tion or order issued under the Act to a person who is
a party to litigation before it. To insure speedy dis-
position of this matter, an appeal may be taken from
the granting of such an injunction from the district
court to the Temporary Court of Appeals pursuant to
the procedure provided in 28 USC 1292(b) for appeal-
ing interlocutory appeals in expedited form.”’
A floor amendment to the judicial review section was
offered by Senator Metcalf and defeated. The amendment,
if it had been adopted, among other things, would have
permitted review of interlocutory injunctions by the Tem-
porary Emergency Court of Appeals in the usual way they
l4a
would be reviewable by courts of appeal. As Senator Met-
calf expressed it: ‘‘In short, it would provide what exists
today—those legal rights that are presently operating
under the Economic Stabilization Act of 1970.’’ Senator
Tower made a statement in which he said that the amend-
ment would pose a serious threat to the program. Senator
Sparkman said that he hoped the amendmeni would not be
agreed to ‘‘because I think it would break up entirely
something that we worked long and hard to achieve.’’ 117
Cong. Rec. 43478-9 (Nov. 30, 1971).
The House version, H.R. 11309 was passed on Dee. 10,
1971. Specifically as to interlocutory appeals it would have
provided: ‘‘The Temporary Emergency Court of Appeals
shall not have the power to issue any interlocutory decree
staying or restraining, in whole or in part, any provision
of this title or the effectiveness of any regulation or order
issued under this title.’’ Permanent injuuctions would have
been issued ‘‘by the Temporary Emergency Court of Ap-
peals upon appeal, or, after hearing, upon recommendation
of a United States district court or judge thereof. Such an
injunction may also be issued by the United States Supreme
Court as provided for by this section.’’
Because of differences in the House and Senate versions,
the proposed amendments were sent to a conference com-
mittee which adopted the Senate version. The conference
report states in part that ‘‘[t]he House bill differed from
the Senate bill... in that ... it gave no injunctive authority
to the district courts.’’ S. Rep. No. 92-579, 92d Cong., 1st
Sess. 26-21 (1971). The conference report was agreed to by
both houses and the Act, reflecting the Senate version, was
signed into law on Dee. 22, 1971.
The legislative history makes plain at least that altera-
tion of traditional judicial review provisions was intended.
And there is nothing to indicate that the specifie provisions
for review as expressed in the Act were not intended.
Wa
In addition to the plain language of the particular sub-
section under discussion, and the legislative history bear-
ing upon it, the context of the entire section itself demon-
strates that the changes reflected in § 211(d)(2) were both
intended and carefully considered.
The grant to this court of exclusive jurisdiction over
all appeals from district courts of the United States in
cases and controversies arising under this title is limited
by the phrase, ‘‘ Except as otherwise provided in this see-
tion... .’’ (§ 211(b)(2)).
The certification by district courts of constitutional is-
sues is required before this court may reach them except
as a part of jurisdiction otherwise granted. Subject to
this power of determination upon certification below, ‘‘. . .
no order of such agency shall be enjoined or set aside, in
whole or in part, unless a final judgment determines that
such order is in excess of the agency’s authority, or is based
upon findings which are not supported by substantial evi-
dence.’’ (§ 211(4)(1).)
As noticed above, however, ‘‘A district court of the
United States or the Temporary Emergency Court of Ap-
peals may enjoin temporarily or permanently the applica-
tion of a particular regulation or order issued under this
title to a person who is a party to litigation before it’’, but
appeals from such interlocutory decisions by a district
court ‘‘may be taken in accordance with .. . section 1292
(b) ....’? (§ 211(d)(2).) ‘‘ Except as provided in subsec-
tion (d) of this section, no interlocutory or permanent in-
junction ... shall be granted by any district court of the
United States. .. .’’ (§ 211(e)(1).)
If (d)(2) were to be read as meaning that appeals may
be taken in accordance with § 1292(a), there would be a
direct contradiction in terms. If the subsection were
thought to be merely permissive in this respect, leaving
subsection (a) to be utilized as a matter of right anyway,
l6a
reference to subdivision (b) would indicate some mindless
aberration which surely this court should not imply, and
cannot fairly imply for the reasons heretofore discussed
and those to be stated later. Equally as insupportable
would be to read the reference to subsection (b) as intend-
ing to provide: ‘‘In addition to the jurisdiction provided
by subsection (a) above, the Temporary Emergency Court
of Appeals shall have the jurisdiction provided by subsec-
tion (b) to review interlocutory orders.’’ The ‘‘puzzling’’
nature of this section which still remains in the view of
Exxon if one of these other interpretations is adopted can
only be resolved by accepting the plain language of the
statute.
Thus, it is clear from (a)/2) in view of all other avail-
able guides, that any appeal to this court from an inter-
locutory order granting or denying a preliminary injunc-
tion may be taken only on certification by the district court.
Why should this be more s‘range than certification proce-
dure for reference to this court of interlocutory constitu-
tional questions? If there were an appeal as of right from
orders denying preliminary injunctions or restraining or-
ders, the certification of interlocutory constitutional prob-
lems would be rather meaningless; all a party seeking an
interim review here would have to do would be to request
and be refused a restraining order or preliminary injune-
tion. Appeals as of right concerning both interim constitu-
tional problems and interlocutory injunction decisions could
well have been thought by Congress to invite delays in the
progress of these cases to final judgment in the district
court. Our experience has Leen that district courts have
been perhaps overly prone to certify interim constitutional
problems to this court. See e.g., Shapp v. Simon, 510 F.2d
379 (T.E.C.A. 1975). There is little reason to suppose that
if the requirement of § 211(d)(2) is adhered to substantial
questions will not be certified as to rulings on applications
for interlocutory injunctions where any reasonable justi-
fication appears.
. —
17a
Should this not prove correct in every instance, parties
still would not be left ‘‘at the mercy’’ of judges who un-
reasonably refuse to certify pursuant te the reference of
§ 211(d)(2), although this possibility has not been thought
to constitute any real objection to the existence of discre-
tionary appeals in ordinary context. Subsection (d) (2)
itself provides in effect that the Temporary Emergency
Court of Appeals, in addition to district courts, may en-
join temporarily the application of a particular regulation
or order to a party upon original application here as well
as in connection with certified interlocutory appeals from
orders of district courts. In Pacific Coast Meat Job. Ass’n.,
Ine. v. Cost of Living Coun., 481 F.2d 1388 (T.E.C.A. 1973),
a case cited by Exxon as one at variance with the present
interpretation of § 211(d)(2), this court in addition to the
usual appeal had before it an original application for an
injunction filed with this court which it denied in connec-
tion with its reversal of the judgment of the lower court.
While the question was not discussed, in our present view
we in any event did have jurisdiction of the original appli-
cation and perhaps pendant jurisdiction of the appeal.
Also relied upon by Exxon as being inconsistent with the
Condor review of § 211(d)(2) is County of Nassau v. Cost
of Living Council, 499 F.2d 1340 (T.E.C.A. 1974), and
McGuire Shaft & Tunnel Corp. v. Local u. No. 1791, U.M.W.,
475 F.2d 1209 (T.E.C.A.), cert. denied, 412 U.S. 958 (1973).
In the same connection could have been added League of
Vol. Hosp. & H. of N.Y. v. Loeal 1199, Drug & H.U., 490
F.2d 1398 (T.E.C.A. 1973). It is true that a threshold ques-
tion of jurisdiction was considered in County of Nassau,
but this was made to depend solely upon whether there was
any distinetion under the circumstances between temporary
restraining orders and preliminary injunctions; insofar as
the opinion discloses the problem with which we are con-
fronted here was neither presented nor ruled upon. Mce-
Guire Shaft & Tunnel Corp. did not involve a § 211 situa-
18a
tion at all, but turned upon § 210(a), since relief was sought
for violation of administrative orders, not against their
application or operation, this court stating (475 F.2d at
1214):
‘‘Clearly, the limitations on the federal courts’ au-
thority to enjoin agencies of the government in the
execution of the act, orders, and regulations there-
under were not considered synonymous with the right
of an individual injured by violations of the program
to enjoin those violations.’’
League of Voluntary Hospitals did not consider the prob-
lem either. But the latter decision underscores the dichot-
omy, if not paradox, which is presented by an interlocutory
appeal as of right from an order granting or denying a
preliminary injunction through which constitutional issues
ean be adjudicated here, and the requirement of certifica-
tion to this court of constitutional issues as a condition for
interlocutory review.
We no longer can delay directly facing up to the jurisdic-
tional problem recognized but determined only in passing in
Condor. Not only do we have a continuing duty to inquire
into our jurisdiction as such, but we should be punctilious
also in assuring ourselves that safeguards established by
Congress against excessive interlocutory demands upon us
to the undue delay of final decision below are not disre-
garded.
If, as the parties claim, every refusal of a preliminary
injunction as well as every such interlocutory injunction
‘an be appealed as of right by any party irrespective of the
trial court’s conviction that appeal would be frivolous or
would not advance the final determination of the cause and
thus should not be certified to this court, a pattern for sub-
stantial delay of final determination in almost every such
case would be engrained into the law contrary to the ex-
19a
pressed intent of Congress.’ Moreover, such uncertified
appeals, which usually involve constitutional attacks, in
effect would wash out any significance of § 211(c) concern-
ing the certification of interlocutory constitutional issues.
The interruption of proceedings in district courts by ap-
peals of right from all of such interlocutory orders, which
are customarily sought in the first instance, is a prospect
which the Congress did not have to invite, whether wise
or unwise. Such appeals however unmeritorious are always
time consuming, not infrequently premature and often
present problems which could be better considered by us
following development of a more adequate record by the
trial courts.
There, indeed, may be much to commend the Congres-
sional plan in preference to such a system for unlimited
appeal of orders granting or denying preliminary injune-
tions. Groundless interlocutory appeals under the Act may
be sereened by the district court beneficially in the first
instanee, as in the case of the review of constitutional
problems. Improvident interlocutory appeals should not be
encouraged. If the granting of preliminary relief against
application of a regulation or order is improperly refused
and the matter is deemed of sufficient importance, our
* Tidewater Oil Co. v. United States, 409 U.S. 151 (1972). con-
struing in different context § 1292(b) as pertaining to orders other
than those granting or denying preliminary injunctions is not
inconsistent in the present entirely dissimilar context with its appli-
eability to the latter orders in view of the express provisions of the
Economic Stabilization Act. It seems quite clear in the present con-
text that when Congress expressly stated in a single subsection that
a ‘‘cistrict court ... may enjoin temporarily . the applice tion
of a particular regulation or order .. .’’ and that ‘‘[a]ppeals from
interlocutory decisions by a district court... under this paragraph
may be taken in accordance with the provisions of section 1292
(b) ...’’, it did not mean that such appeals could not be taken by
virtue of subsection (b) if the order was one ‘‘enjoined fing |
temporarily .. . the application of a particular regulation or
order. ...’’
20a
jurisdiction may be invoked by an original application
which we can reject without interruption of the proceed-
ings below, or grant if a sufficient showing is made to war-
rant this action. Should the district court refuse to certify
an interlocutory appeal from an order granting an injunc-
tion, the case in all probability better could proceed to final
determination below anyway unless this court is convinced
upon a clear showing of the absence of legal foundation
that prohibition, or other extraordinary remedy should
issue. If the granting of such preliminary injunction is
within the discretion of the trial court and thus not amen-
able to extraordinary relief here, the probability of our
overruling the exercise of that discretion even on inter-
locutory appeal could be minimal. But irrespective of
whether the system mandated by Congress is the best one,
we are bound to give it effect, no constitutional obstacle
appearing.
The appeals are hereby disinissed for lack of jurisdiction
in this court.
TECA
No. 3-5 Exxon Corporation v. Feperat Enercy ADMINIS-
TRATION
No. 6-8 Maratuon Or. Company v. Feperat Ewerey Ap-
MINISTRATION
Hastinas, Judge, dissenting. The statement in Section
911(d)(2) of the Economie Stabilization Act, 12 U.S.C.
1904 note, that appeals from decisions of district courts
respecting injunctions ‘‘may be taken in aceordance with
the provisions of section 1292(b) of title 28, United States
Code ...,’’ presents this court with a difficult question of
interpretation. There seem to be two possible interpreta-
tions of the provision. Either the mention of 4 1292(b)
precludes appeals pursuant to §1292(a)(1), or the latter
provision remains available. The two interpretations are
21a
each, at least in some respect, unsatisfactory. In lighc of
the congressional policy behind the judicial review provi-
sions of the Economic Stabilization Act, I find the major-
ity’s view that 4 1292(a)(1) review is precluded the far
less satisfactory interpretation and I therefore dissent.
The majority holds that it was the intent of Congress
to limit the appellate jurisdiction of the Temporary Emer-
gency Court of Appeals over orders granting or denying
preliminary injunctions to those which have been certified
by the district court under 28 U.S.C. § 1292(b). A complete
review of the legislative history of the Act reveals only a
single mention of 28 U.S.C. § 1292(b) in all of the commit-
tee reports and debates on the floor of the House and
Senate. That single sentence, in the Senate committee re-
port, does little more than restate the language of the
statute:
To insure speedy disposition of this matter, an appeal
may be taken from the granting of such an injunction
from the district court to the Temporary Emergency
Court of Appeals pursuant to the procedure provided
in 28 USC 1292(b) for appealing interlocutory ap-
peals in expedited form. S. Rep. No. 92-507, 92d Cong.,
Ist Sess. 12 (1971); U.S. Cope Conc. & Ap. News 2294
(1971).
I cannot join the majority’s conelusion that any decision to
limit review to the provisions of 4 1292(b) was ‘‘both in-
tended and carefully considered.’’
If Congress had in fact intended to restrict review of
orders concerning injunctions to those certified by the dis-
trict court, any careful consideration of the language of
, 1292(b) and the cases which have interpreted it would
have revealed that § 1292 would not be an appropriate ve-
hicle to ‘‘insure speedy disposition’’ of orders respecting
preliminary injunctions.
22a
The Supreme Court in Tidewater Oil Co. v. United
States, 499 U.S. 151 (1972), concluded that the statute’s
legislative history demonstrated ‘‘that § 1292(b) was in-
tended to establish jurisdiction in the courts of appeals to
review interlocutory orders, other than those specified in
§ 1292(a), in civil cases in which they would have juris-
diction were the judgments final.’’ 7d. at 168 (footnote
omitted). The Court further stated that ‘‘§1292(b) was
intended to supplement § 1292(a), not to provide a substi-
tute for it.’’ 7d. at 168 n. 41. The Court went on to consider,
in dicta, the possible usefulness of § 1292(b) in securing
review of orders concerning preliminary injunctions in a
class of cases where resort to § 1292(a) was precluded. The
Court said, ‘‘[T]he fact is that permitting interlocutory
appeal under § 1292(b) would not bring these orders and
the related evidence before the courts of appeals since they
come within § 1292(a)(1).’’ 7d. at 172 n. 47. The implica-
tion of this observation for our jurisdictional question is
clear. If, as the majority holds, § 211(d)(2) of the Eeo-
nomic Stabilization Act prevents use of §1292(a)(1) to
appeal orders granting or denying preliminary injunctions,
then the certification procedure of § 1292(b) could not be
used to appeal such orders either.
The Supreme Court’s observation was based on careful
conzideration of iegislative history. The Court’s analysis
is persuasive and should be followed here. But even if we
were to veject as dicta the Supreme Court’s conclusion
that § 1292(b) is wholly unavailable to review a prelim-
inary injunction decision, § 1292(b), if available, would be
a very awkward and inappropriate mechanism for such
review.
The language of 28 U.S.C. § 1292(b) only makes sense
if it supplements review as of right from orders concern-
ing preliminary injunctions rather than supplants it. The
section begins ‘‘when a district judge, in making in a civil
action an order not otherwise appealable under this section.
23a
...? Since §1292(a)(1) permits review of injunctive or-
ders, by its own terms, the proce lures of § 1292(b) are noi
to be applied to appeals from injunctions.
The standards for certification under § 1292(b) were not
designed to be and are not suitable for application to pre-
liminary injunctions. Section 1292(b) requires a ‘‘control-
ling question of law,’’ but the controlling issues in a pre-
liminary injunction proceeding are in large part factual,
such as whether there is irreparable harm to the plaintiff,
whether harm to the defendant if an injunction is granted
would outweigh benefit to the plaintiff, and whether an in-
junction would serve the public interest. There is substan-
tial precedent supporting the view that § 1292(b) certifica-
tion is inappropriate in matters that lie within the discre-
tion of the district court,’ but the issuance of a preliminary
injunction is ‘‘committed to the sound judicial discretion
of the trial court.’’ League of Voluntary Hospitals v. Local
1199, Drug & Hospital Union, T.¥B.C.A., 490 F.2d 1398,
1401 (1973).
While the legislative history of the Economie Stabiliza-
tion Act fails to demonstrate a clear intent to restrict re-
view of decisions about preliminary injunctions to the pro-
cedures of §1292(b), it does contain a detailed statement
of the congressional policies which the judicial review pro-
visions were designed to implement:
The judicial review provision has been written with
several important principles in mind: (1) speed and
consistency of decisions in cases arising under the Act,
(2) avoidance of any breaks or stays in the operation of
the Stabilization Program, and (3) relief for particular
persons aggrieved by the operation of the program.
19 Moore’s Feperat Practice § 110.22/2] at 261 (2d ed. 1973) ;
C, Wrieut, LAw or Feperar Courts § 102 at 463 (2d ed. 1970).
But see Katz v. Carte Blanche Corp., 3 Cir., 496 F.2d 747, 752-756,
cert. denied, ——- U.S. , 95 S.Ct. 152 (1974).
24a
s. REP. NO. 92-507, 92d Cong., Ist Sess, 10 (1971); v.s.
CODE CONG, & AD. NEWs 2292 (1971).
Limiting appeals from orders concerning preliminary in-
junctions to those certified pursuant to § 1292(b) would be
likely to produce delay and inconsistency rather than fur-
ther the legislative intent. Considering the inapplicability
of the requirements for a certification under § 1292(b) to
preliminary injunction questions, a district court would
often be correct in refusing to certify its order for appellate
review. As a result, district court orders inconsistent with
decisions of the Temporary Emergency Court of Appeals
could remain in effect for substantial periods of time. While
a party who had been denied preliminary relief in the dis-
trict court eculd petition our court directly for an injune-
tion, the party aggrieved by the issuance of an injunction
by the district court would have no such alternative avail-
able. Thus, the situation Congress most feared, of injune-
tions creating breaks or stays in the program, is furthered
by limiting review to § 1292(b).
The general design of the jurisdictional review provi-
sions of the Economie Stabilization Act is to limit the rela-
tive authority of the district courts and to concentrate au-
thority in our court. Limiting review of injunction orders
to those properly certified under § 1292(b) would make dis-
trict courts in cases arising under: the Keonomie Stabiliza-
tion and Emergency Petroleum Allocation Acts more pow-
erful than they would be in other cases and our court less
powerful than other courts of appeals. The district courts
would have what the Supreme Court has described as ‘‘vir-
tually unlimited authority over the parties in an injunctive
proceeding.’’ Sampson v. Murray, 415 U.S. 61, 87 (1974).
The holding of the majority here that § 1292(b) is the
only avenue of appeal for orders respecting preliminary
injunctions is not only inconsistent with the well-developed
interpretation of §1292(b) and the legislative policies be-
hind the Economic Stabilization Act, but it is also incon-
sistent with the prior uniform practice of our court in
hearing appeals from preliminary injunction decisions
without requiring a § 1292(b) certification.
In Pacific Coast Meat Jobbers Ass’n v. Cost of Living
Council, T.E.C.A., 481 F.2d 1388 (1973), our court heard and
decided an appeal by private parties which had been de-
nied a preliminary injunction. While the court also had
before it an original application for a preliminary injune-
tion, the opinion of the court leaves no question that it
was deciding both the preliminary application and the ap-
peal. In League of Voluntary Hospitals, supra, the court
stated that the case before it was ‘‘an appeal, pursuant to
Section 211 of the Feonomie Stabilization Act’’ from an
order granting a preliminary injunction, yet the court did
not find it necessary to diseuss any possible jurisdictional
obstacles to its hearing the case.
In County of Nassau vy. Cost of Living Council, T.E.C.A.,,
499 F.2d 1340 (1974), our court heard appeals by a gov-
ernment ageney from a series of decisions of a district
court granting among other relief, a temporary restraining
order. In County of Nassau the jurisdictional question was
explicitly considered. The court said:
At the threshold a question arises whether the tem-
porary restraining order against the COLC’s tempo-
rary order is appealable. We hold that it is appealable
under the rationale of Sampson v. Murray, 415 U.S.
61, 94 S.Ct. 937, 39 L.Ed.2d 166 (decided Feb. 19, 1974)
.... 499 F.2d at 1343.
In Sampson v. Murray, the Supreme Court held that a tem-
porary restraining order would be considered as a prelim-
inary injunction so that review under 28 U.S.C. § 1292(a)
(1) would be available. The Court reasoned:
A district court, if it were able to shield its orders
from appellate review merely by designating them as
eee eee
26a
temporary restraining orders, rather than as prelim-
inary injunctions, would have virtually unlimited au-
thority over the parties in an injunctive proceeding.
415 U.S. at 86-87.
Since Sampson was an interpretation of § 1292(a)(1), our
court’s reliance upon that case is an implicit holding that
the provisions of 28 U.S.C. § 1292(a)(1) permit our court
to hear appeals from decisions concerning preliminary in-
junctions without a certification.
In light of this precedent, the inutility of § 1292(b) in
reviewing preliminary injunction orders and the legislative
policies behind the judicial review provisions of the Eco-
nomic Stabilization Act, I would hold that § 211(d)(2) of
the Act does not preclude this court’s jurisdiction over
appeals pursuant to 28 U.S.C. §1292(a)(1). While I ree-
ognize that this holding would render the reference to
§ 1292(b) in 4 211(d)(2) superfluous, I believe it achieves
a far more satisfactory result than the holding of the
majority.
27a
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
No. C 75-36
MEMORANDUM AND ORDER
Maratrnon Or. Company, Plaintiff,
v.
FeperaL FExercy ApMINistraTion, et al., Defendants.
. > *
WatryskI, J.:
This cause is before the Court on a motion for a pre-
liminary injunction. Because of the nature of the statute
and regulation involved herein and the relief sought, this
Court has caused the matter to be expedited in every way.
The Court held a hearing on the motion on January 29,
1975, and permitted the Ashland Oil Company to intervene,
pursuant to Rule 24(a), Federal Rules of Civil Procedure,
as a party defendant. The Court also permitted the Inde-
pendent Refiner’s Association of America to appear as an
amicus curiae. All have filed briefs on the matters raised
by the motion.
Fixpincs or Fact
Plaintiff, Marathon Oil Company (hereinafter Mara-
thon), is a corporation organized and existing under the
laws of the State of Ohio, with its corporate offices and
principal place of business in Findlay, Ohio. Marathon is
an integrated medium-sized oil company which produces,
transports, refines and sells erude oil in the United States
and abroad. Its principal markets for petroleum products
in the United States are in the Midwest and in the South-
east.
28a
Defendant, Federal Energy Administration (herein-
after FEA), is an agency and instrumentality of the United
States under the Federal Energy Administration Act of
1974, 15 U.S.C., § 761 ef seq.; and it was established by
Executive Order No. 11,790 (June 27, 1974). The FEA :s
responsible for the administration of the Emergency Pe-
troleum Allocation Act of 1973, as amended (hereinafter
the EPAA), 15 U.S.C., (751 et seq. This responsibility
previously was exercised by the Federal Energy Office
(hereinafter FEO) established by Executive Order No.
11,748, 3 C.F.R., 6376 (Supp. 1974).
Defendant Frank G. Zarb is Administrator of FEA. The
authority which the EPAA vests in the President was dele-
gated to the Administrator by Executive Order No. 11,790
(June 27, 1974).
Defendant-intervenor, Ashland Oil, Incorporated (here-
inafter Ashland), is an ‘independent refiner’’ as that term
is defined in 43 of the EPAA and the regulations issued
thereunder.
The EPAA became law on November 27, 1973. Section
4(a) thereof required the President to promulgate regula-
tions for the mandatory allocation of erude oil, residual
fuel oil and refined petroleum products in amounts, and at
prices to be specified by the regulations. Those regulations
were to implement, ‘‘to the maximum extent practicable’’,
certain objectives as set forth in §4(b) of the Act.
Among others these objectives included the:
«<* * * preservation of an economically sound and com-
petitive petroleum industry; including the priority
needs to restore and foster competition in the produe-
ing, refining, distribution, marketing, and petrochem-
ical sectors of such industry, and to preserve the com-
petitive viability of independent refiners, small refin-
ers, nonbranded independent marketers, and branded
independent marketers;
en
29a
equitable distribution of c.ude oil, residual fuel oil,
and refined petroleum products at equitable prices
among all regions and areas of the United States and
sectors of the petroleum industry, including independ-
ent refiners, small refiners, nonbranded . »dependent
marketers, branded independent marketers, au’ among
all users;
* - *
economic efficiency; and
minimization of economic distortion, inflexibility, and
unnecessary interference with market mechanisms.”’
The term ‘‘independent refiner’’ is defined in 4 3(3) of
the EPAA as any refiner that obtains more than 70 percent
of its refinery input from sources not subject to its control
and which markets a substantial portion of its gasoline
through independent marketers. The term ‘‘small refiner”’
is defined in §3(4) as any refiner whose total refinery
capacity does not exceed 175,000 barrels per day.
Thereafter, the President established the Federal
Energy Office which adopted Mandatory Fuel Allocation
Rules. These were revised by the FEO on January 14, 1974,
when it issued the Petroleum Allocation and Price Regu-
lations (39 Federal Register 1924, et seq. January 15,
1974).
Onc aspect of the FEO’s initial regulatory scheme was
a two-tier pricing system which had its antecedents in the
President’s Economic Stabilization Program.
In August of 1973, the Cost of Living Council (herein-
after CLC), as a part of Phase IV of the Economic Stabiii-
zation Program, was charged with devising a system of
price controls for the petroleum industry. At that time the
United States was becoming increasingly dependent on
foreign crude oi! to meet its supply needs because domestic
producers were not supplying as much of our needs as
30a
formerly. Foreign crude oil prices, moreover, were in the
process of rising substantially above their previous levels
due to concerted action by the Organization of Petroleum
Exporting Countries (hereinafter OPEC). This rise in
prices began in 1971 when the members of OPEC com-
meneced negotiations on a series of ‘‘settlements’’ with the
major international oil producers; each new settlement was
somewhat higher than the last and further drove up the
price of crude oil on the world market, including the price
of domestic crude oil.
Thus, the CLC determined that any system of price
controls to be imposed on the petroleum industry must
minimize as much as possible the inflationary impact of
world-wide oil price increases on the United States econ-
omy, while at the same time encouraging increased do-
mestic production of crude oil. To accomplish those dual
objectives, CLC decided that most domestically-produced
crude oil should be subject to ceiling price controls, but
that some domestically-produced erude oil should be ex-
empted from ceiling price controls in order to stimulate
domestic production. The CLC also determined that the
first sale of imported erude oil must be exempted from
ceiling prices because it would not be possible to obtain
sufficient imported supplies at a controlled price. The re-
sult was a two-tier pricing system for crude oil, promul-
gated by the CLC in August, 1973, and subsequently
adopted on January 14, 1974 in the FEO Mandatory Pe-
troleum Allocation and Price Regulations.
Under the two-tier pricing system, FEA imposed a eceil-
ing price on all domestic crude oil produced from a given
property to the extent that the level of crude oil produe-
tion from this property falls at or below the level of pro-
duction from the same property in the same month of
1972 (‘‘old’’ oil). Crude oil produced in exeess of 1972
production levels from the same property (‘‘new’’ oil) is
exempt from price controls, and each barrel of new oil
3la
produced releases from price controls a barrel of old oil
(‘‘released’’ oil). The first sale of imported crude oil into
the United States remains free from price controls under
FEA regulations, and the ‘rst sale of crude oil produced
from ‘‘stripper’’ wells (wells producing less than 10 bar-
rels per day) also is exempted from price controls under
§ 4(e)(2)(A) of the EPAA.
The present ceiling price on old oil is basically the May
15, 1973 posted price, plus $1.35, or approximately $5.25
per barrel. When the CLC imposed controls on old do-
mestic crude oil in August, 1973, the per barrel ceiling
price was set at May 15, 1973 posted prices plus $.35, re-
sulting in a price of approximately $4.25 per barrel. The
price remained at that level until it was raised by $1.00
to the present level of approximately $5.25 per barrel on
December 19, 1973. During that same time period, how-
ever, prices on representative foreign crude oil rose by
more than $8.00 per barrel from $3.07 per barrel in August,
1973, to approximately $11.65 per barrel in January, 1974.
The increase in foreign crude oil prices has further stim-
ulated an increase in the price of uncontrolled domestic
crude oil, ie., new, released and stripper-well oil, from
an August, 1973 price of approximately $5.00 per barrel
to a current price in excess of $10.00 per barrel. Presently,
approximately 60 percent of all crude oil runs to stills in
the United States consists of oil not subject to FEA price
controls, while the balance, FEA price controlled old oil,
represents approximately 40 percent of all crude oil runs
to stills.
The great disparity between the prices of uncontrolled
and controlled crude oil in the United States, which is a
direct result of FEA’s two-tier pricing system, was not,
however, having an equal impact on all refiners prior to
the cost equalization program. Instead, there existed un-
even access to price controlled ‘‘old’’ oil; most major in-
tegrated oil companies had far greater access to old oil
d2a
than did the small independent refiners, as a class. The
result was that those refiners, including some majors, which
were ferced to rely more heavily on uncontrolled domestic
or foreign crude oil incurred higher composite crude costs
in the refining of products than those which had greater
access to price-controlled old oil. The uneven distribution
of the benefits of old oil among refiners, which resulted
in significant input crude cost differentials, was translated
into significant price differentials among refiners in their
sales of refined petroleum products under applicable FEA
price regulations.
Under FEA price regulations for refiners, a refiner can
charge no more than its May 15, 1973 price on a given
product, plus an adjustment for net increase since May,
1973, in the cost of crude oil and purchased refined prod-
ucts. While May 15, 1973 profit margins among refiners
varied only slightly, the largest contribution to the vary-
ing prices charged by refiners has been the difference in
average weighted crude costs attributable to the two-tier
pricing system on crude oil. Those differences have been
passed on at the wholesale and retail level sinee such
resellers, under FEA regulations, while they must main-
tain their May 15, 1973 mark-up on a product, may pass
through on a dollar-for-dollar basis any increased product
costs from their suppliers.
During the shortages of refined petroleum products
created by the Arab oil embargo in the Winter and Spring
of 1974, the cost differentials resulting from the different
proportions of old oil which refiners used to compute their
overall crude costs were passed through easily to the ulti-
mate consumer. The result was, of course, that consumers
were paying significantly different prices for the same
refined product. With the termination of the Arab oil em-
bargo and a re-emergence of adequate supplies, competi-
tion began to reappear for certain products. Although the
differences in refiners’ average crude oil costs continued,
33a
competition in the marketing of refined products has
caused a recent narrowing in retail prices.
In order to remain competitive, however, many of those
refiners with higher input costs due to their low proportion
of old oil, and those marketers to whom they sell, have
been forced to endure a severe cost-price squeeze. Many
small and independent refiners and independent marketers
—unable to absorb the full amount of such costs—were
forced to charge higher prices for their products than
their competitors with a resulting loss of market shares.
Thus, the two-tier erude oil pricing structure, which was
deemed necessary to minimize the inflationary impact of
world crude oil prices and to maintain incentives for
domestic production, generated economic distortions and
interfered with market machanisms, including the con-
tinued existence of independent refiners because of the
uneven distribution of old oil among all of American
refiners.
The regulatory scheme also included a provision that
the supplier/purchaser relationships in effect under con-
tracts for sales, purchases and exchanges of domestic crude
oil on December 1, 1973, shall remain in effect for the
duration of the erude oil allocation program.
The President’s program also included a mandatory
buy/sell feature under which each ‘‘small’’ and ‘‘inde-
pendent’’ refiner (as those terms are defined in §§ 3(3)
and 3(4) of the Allocation Act) is entitled to purchase a
varying quantity of crude oil, the amount of which is caleu-
lated in accordance with rules set forth in 10 C.F.R. § 211.65,
from the 15 United States refiners which are neither
‘*small’’? nor ‘‘independent’’ within the meaning of the
EPAA.
The FEA’s special pricing rules governing sales of
crude oil under the buy/sell program (10 C.F.R. § 212.94)
provide that a refiner-seller may charge no more than its
34a
weighted average price of all crude oil delivered to it in
the area of the country where the sale is made in the
month the sale is made, plus certain adjustments for
handling, transportation, and differing crude grades. The
program also allows a refiner-seller to pass through on a
dollar-for-dollar basis in its prices for refined petroleum
products any increased costs related to replacing crude
sold under the mandatory buy/sell program with higher-
priced crude oil.
The purpose of the buy/sell program is to correct supply
imbalances between the major integrated refiners, which
have relatively greater direct control over both domestic
and foreign crude oil, and the small and independent re-
finers, which have been disproportionately dependent on
foreign crude oil in a period of shortages. Nevertheless,
the FEA pricing rules for buy/sell program sales, which
require sales be made basically at a refiner-seller’s weight-
ed average price, did give small and independent refiners
some access to the benefits of price-contorlled old oil.
The buy/sell program, however, proved to be inequitable
for several reasons. Firstly, the firms entitled to buy the
highest volume of crude oil because of inadequate supplies
were often not necessarily the firms suffering the most
from a lack of low cost crude oil. Secondly, it often hap-
pened that a buyer obtained ernde oil from a seller who
was himself suffering from a lack of low cost erude oil.
Thirdly, since the buy/sell program was designed princi-
pally as a supply device for small independent refiners,
it did not seek to equalize the crude oil costs among those
refiners who were not qualified as buyers and suffered
from a lack of low cost crude oil. It was for these reasons,
among others, that the FEA designed what it ealls the
Cost Equalization Program (hereinafter CEP).
Under the CEP, the FEA issues to each domestic re-
finer a number of ‘‘entitlements’’? which is equal to that
refiner’s proportionate share of the total monthly old oil
35a
supply existing in the United States, with an upward ad-
justment in the number of entitlements issued to those
refiners who qualify for a ‘‘small refiner bias.’’? Addition-
ally in January, 1975, a limited number of eligible firms
(including refiners) who import residual fuel oil and home
heating oil (which includes no. 2-D diesel fuel) have been
issued entitlements based on the volume of such product
imported. (The FEA has removed importers from the
coverage of the CEP by regulation effective February 1,
1975.)
An ‘‘entitlement’’ is the right of a refiner owning the
entitlement to include one barrel of old oil in its adjusted
erude oil receipts in a particular month. A refiner with
more than its proportionate share of the national old oil
supply must buy a sufficient number of entitlements to
cover its excess barrels of old oil. A refiner with less than
its proportionate share of the national old oil supply (and
certain refiners who receive a small refiner bias in the
issuance of entitlements) will have an excess number of
entitlements which they must sell to other refiners. Those
eligible ‘‘importers’’ which have been issued entitlements
must similarly sell their entitlements to those refiners who
need them to cover the refiner’s excess supplies of old oil.
Because the purpose of the CEP is to remove the inequita-
ble conditions caused by the two-tier pricing system, the
FEA has set the price of entitlements for the month of Jan-
uary at $5.00 with reference to the current differential be-
tween controlled and uncontrolled crude oil prices (39 Fed.
Reg. 43103, December 10, 1974).
To determine the precise number of entitlements issu-
able to a refiner (a refiner’s proportionate share of the
total old oil supply in a given month), the FEA computes
an ‘‘adjusted national old oil supply ratio’’ for each month.
This ratio is the volume of old oil included in the aggre-
gate crude oil receipts for all domestic refiners, expressed
as a percentage of the total volume of crude oil runs to
36a
stills for all refiners for that month. For example, if the
total number of barrels of old oil was 200 million and the
total number of crude runs is 500 million barrels, the old
oil supply ratio is 2/5 or 40 percent. Thus, if all old oil
were equitably allocated among all domestic refiners, each
refiner would have crude oil runs which consist of 40
percent old oil.
Since, however, the FEA also issues entitlements to
certain importers of product and to small refiners in a
number adjusted upward in accordance with a ‘small
refiner bias’’, the total volume of old oil used to calculate
the national ratio of old oil must be reduced by the number
of entitlements so issued. Having established an adjusted
national old oil supply ratio, the FEA applies this ratio to
each domestic refiner’s volume of crude oil runs, and then
issues to each refiner a sufficient number of entitlements
to cover that percentage of its crude runs.
In addition to the number of entitlements it would other-
wise receive as a refiner, a small refiner receives a further
number of entitlements under a small refiner bias. Small
refiners with a daily average volume of crude oil runs to
stills of less than 175,000 barrels for a particular month
are issued additional entitlements for each day of that
month in a number equal to a designated percentage of
its average daily volume, with the percentage basis be-
coming greater as crude oil runs become smaller. 10 C.F.R.,
§ 211.67(2).
The FEA created the small refiner bias in recognition
of three facts. First, small refiners have relatively higher
operating costs and capital expenditures than other re-
finers. Second, small refiners have traditionally, and must
continue, to market their products at a lower price than
the products of the major branded refiners in order to
remain competitive. Third, there is a need to preserve the
historical position of small refiners.
Fe RR EE Oe A
37a
The FEA concluded that the CEP should not begin
and end with the refinery level because that would not
place some marketers or retailers in a competitive posi-
tion. Therefore, the FEA also designed its CEP so that
entitlements were made available to some firms which
import finished products such as no. 2 heating oil and
residual fuel oil.
All refiners and importers who seli entitlements are
required to count their proceeds on entitlement sales as
a reduction in crude oil or product costs. All refiners who
must buy entitlements are permitted to count the cost
thereof as an addition to ernde oil costs, FEA price regu-
lations further permit these increased crade oil costs to
be passed through to the ultimate consumer. It is not re-
quired that these higher costs be passed along; rather,
that decision is left to each refiner to make for himself.
On January 10, 1975, the FEA issued an order assign-
ing entitlements for refinery runs in the month of Novem-
ber, 1974, and requiring that certain refiners (including
Marathon) purchase specified numbers of entitlements
from other refiners (or importers) on or before January
31, 1975. This order was published in the Federal Register
January 13, 1975. 40 Fed. Reg. 2559 (1975). Marathon
was ordered to purchase from other refiners (or import-
ers) 721,622 entitlements at $5.00 each, a total of $3,608,110,
by January 31, 1975. The entitlements regulation provides
that FEA will issue entitlement purchase orders in each
subsequent month at least through August 31, 1975, the
date of expiration of the Act.
On January 13, 1975, Marathon filed applications and
supporting documents with FEA requesting (1) a stay of
Marathon’s obligations to purchase entitlements pursuant
to the CEP, and (2) exceptional relief from Marathon’s
purchase requirements under this program. On January
23, 1975, the Office of Exceptions and Appeals of the FEA
denied the applications for a stay.
38a
The Office of Exceptions and Appeals presently has un-
der active consideration, pursuant to expedited emergency
procedures (39 Fed. Reg. 43814 (1974)), the application
by Marathon for an exception and has already requested
supplemental information from Marathon.
Marathon has failed to establish that it is likely to suffer
irreparable harm in the event an injunction is denied, or
indeed any harm at all. The evidence tends to show that
as a result of the CEP, Marathon will be placed in a
slightly better position as respects crude oil costs and com-
petition than it was in before the price of domestic crude
oil was frozen.
The evidence tends to show that a delay in the implemen-
tation of the CEP caused by an injunction would force the
FEA to recalculate its whole entitlements program. Move-
over, it would continue the effects of a regulatory scheme
that even the government concedes has resulted in severe
inequities as to crude oil costs which appear to have fost-
ered an unhealthy lack of competition in the oil industry.
Marathon has not established that it will be unable to
pass along the costs of its entitlement purchases. In fact,
it concedes that it will be able to pass at least some of the
costs. Moreover, it also concedes that the CEP does not
threaten its existence, and offers no evidence to rebut the
FEA’s showing that further delay in implementation of
CEP will result in more damage to competition within the
oil industry.
Conc.Lusions or Law
This Court has jurisdiction of this action under § 5(a)(1)
of the EPAA, which makes 64 205-211 of the Economie
Stabilization Act of 1970 (hereinafter ESA) (reprinted as
a note to 12 U.S.C., § 1904) applicable to a regulation prom-
ulgated under §4(a) of the EPAA; and 6¢ 210(a) and
21l1(a) of the ESA.
me
39a
Section 211(d) of the ESA provides that:
«* * * no regulations of any agency exercising au-
thority under this title shall be enjoined or set aside
in whole or in part, unless a final judgment determines
that the issuance of such regulation was in excess of
the agency’s authority, was arbitrary or capricious, or
was otherwise unlawful under the criteria set forth
in [5 U.S.C., § 706(2)], and no order of such ageney
shall be enjoined or set aside in whole or in part, un-
less a final judgment determines that such order is
in excess of the agency’s authority, or is based upon
findings which are not supported by substantial evi-
dence.’’
The section further provides that:
‘‘fa] district court of the United States . ° : may
enjoin temporarily or permanently the application of
a particular reguiation or order issued under this
title to a person who is a party to litigation before it.”’
Section 211(e)(1) provides that:
‘‘fe]xcept as provided [in §211(d)] no interlocu-
tory or permanent injunction restraining the enforce-
ment, operation, or execution of this title, or any regu-
lation or order issued thereunder, shall be granted by
any district court of the United States or judge there-
of.’’
Thus, under the foregoing, this Court may enjoin the
CEP as to Marathon alone, only if it finds that the regula-
tion was issued in excess of the FEA’s authority, or is
arbitrary or capricious, or if the regulation was adopted
without procedure required by law, or if it is unsupported
by substantial evidence. The Court will treat each of these
grounds in turn.
40a
Marathon contends that the CEP exceeds the FEA’s
authority under §4(a) of the EPAA because the CEP
does not allocate oil. Instead, it is argued, the CEP is an
administrative subsidy program which requires some re-
finers to finance other refiners and importers in their pur-
chases of crude oil. Thus, since the CEP is not an alloca-
tion program, it must be invalid.
The Court does not find this argument well taken. It
seems to suggest, as the FEA points out, that the CEP
cannot qualify as an allocation program simply because it
does not require the physical transfer of crude oil among
refiners. Such a physical transfer requirement would in-
deed seem to have added more administrative burdens as
well as increased costs to an already burdened industry
producing an already very expensive product—to say noth-
ing of the problems for FEA. Hence, the CEP is clearly
an allocation program since it achieves the same result that
actual transfers of crude oil would have.
Moreover, it is clear from the legislative history of the
EPAA that the Congress intended the President (and the
FEA) to have a great deal of flexibility in achieving the
goals it established in 4 4(b). The Conference Committee
Report emphasized that:
‘** * * the President is to retain full authority to
require allocation at the producer level on a national,
regional, or case-by-case basis whenever he determines
it is necessary to attain the objectives of the Act. It
is expressly intended to give the President flexibility
to act selectively. Accordingly, he may apply controls
to large but not small producers—thus avoiding ad-
ministrative complexity.’’
2 U.S. Code Cong. & Adm. News, 1973, at 2699.
Marathon’s contention that the CEP exceeds the FEA’s
authority to set prices under the EPAA is also without
4la
merit. The Senate Committee Report on the extension of
the EPAA made express reference to the FEA’s power to
adopt a program removing the inequities in the prices of
erude oil.
‘‘The FEA can, of course, * * * change existing price
controls even if the Act is extended for a brief period.
The [EPAA] includes authority for such actions. For
example, it provides ample authority for the FEA to
institute a system of price equalization to provide that
all segments of the industry benefit from lower-priced
domestic oil. The Committee was urged to amend the
Act to achieve this objective but has been assured that
FEA intends to institute a price equalization program
under existing authority in the immediate future.’’ [S.
Rep. No. 93-1082, Comm. on Interior and Insular Af-
fairs, 93d Cong., 2d Sess. at 2, Aug. 9, 1974.].
The House report echoes the Senate’s with strikingly sim-
ilar language:
‘Moreover, the [EPAA] includes adequate author-
ity to permit the FEA to institute a system of price
equalization applicable to crude oil, residual fuel oil
and refined products to eliminate the regional and
competitive inequities which result from a depend-
ence upon the high-cost imported oils and petroleum
products. The FEA’s stated commitment to Subcom-
mittee Chairman Macdonald during the hearings on
this bill to move promptly on a price equalization pro-
gram has convinced the Committee that specific amend-
ments to the Act to compel such action may prove to
be unnecessary.’’ [H. Rep. No. 93-1443, 93d Cong., 2d
Sess. at 3 (1974).]
Thus, if the EPAA fails to provide adequate authority to
enact the CEP, the Congress was mysteriously unaware
of it.
42a
Marathon’s contention that the FEA authority to im-
pose this regulation is limited to perieds of erude oil
searcity such as accompanied the Arab Oil embargo has
been effectively undermined by the decision in Union Oil
Co. v. Federal Energy Administration, No. CV 74-1943-
MML (C.D. Cal. 7-25-74). There the court said:
‘**In contending that the Emergency Petroleum Allo-
cation Act authorized petroleum allocation only dur-
ing the period of physical shortages, the plaintiff asks
the court to imply a limitation which is not expressed
in the Act but is merely to be inferred from some
language in the Act. But the Act itself does not have
express language dealing with the occasions in which
the power to make regulations will end. * * * But Con-
gress had some concern about the structure of the pe-
troleum industry and of the welfare of the independent
refiners at times other than the period of shortages
brought on by the Arab oil embargo. Certainly the
shortages gave impetus to the passage of the Act and
provided the oceasion for its passage, but the Act is
not limited to the problems of physical shortages. Con-
sequently, the Court does not think that the end of the
physical shortages spells the demise of the power to
allocate petroleum.’’
Marathon’s contentions that the EPAA empowers the
the FEA to adopt only one regulation is so plainly frivo-
lous as not to require extended discussion. The short an-
swer is that 44(g)(1) of the EPAA specifically permits
the President to amend the regulation promulgated pur-
suant to §4(a) so long as the amended regulation meets
the statutory requirements.
It is thus the conelusion of this Court that the CEP is
within the statutory authority of the EPAA and may not
be enjoined on the ground that it exceeds such authority.
43a
Next plaintiff contends that the CEP is arbitrary, ca-
pricious and unsupported by substantial evidence. Here
the issue is not whether the Court agrees with the FEA’s
decision to adopt the CEP or whether the CEP is the best
answer possible to the problems identified by the FEA.
See, Pacific Coast Meat Job. Ass’n v. Cost of Living Coun-
cil, 481 F.2d 1388 (T.E.C.A. 1973). The only issue here is
whether the decision of the FEA had a rational basis, given
all the facts. Very clearly, the Court’s conclusion must be
in favor of the FEA. See, Mandel v. Simon, 493 F.2d 1239
(T.E.C.A. 1974).
To conclude otherwise would be to ignore the mass of
evidence adduced by the FEA in this Court. There can be
no question that the FEA’s selection of refiners as buyers
or sellers of entitlements on the basis of their old oil sup-
plies was reasonable and further the various, if conflicting
objectives found in § 4(b) of the EPAA.
As has already been found by this Court the two-tier
pricing system on crude oil which the FEA maintains in
order to minimize the inflationary impact of world-wide
oil price increases, while stimulating domestic production,
has had an undesirable side effect. Because old oil is price-
controlled at approximately $5.25 a barrel, and for no other
reason, refiners having more than their proportionate share
of the national old oil supply have lower input costs. Re-
finers having less than their proportionate share have
higher input costs since they must rely more heavily on
high-priced, uncontrolled, domestic or foreign crude oil
that sells, respectively, at approximately $10.00 and $11.25
a barrel. Hence, refiners with greater access to old oil
receive a competitive pricing advantage in marketing their
products based solely on FEA’s two-tier pricing system,
an advantage which did not exist prior to the imposition of
the two-tier system and which would cease to exist if FEA
were immediately to remove its ceiling price on old oil.
The mere fact that three major integrated refiners which
44a
have less than their proportionate share of old oil will be
entitlement sellers, while a few small refiners will be buy-
ers, does not make the program irrational. Rather, the pro-
gram merely places the entire petroleum industry in the
competitive situation that existed prior to the two-tier
pricing system.
This Court will not belabor the point. Marathon’s many
claims of irrationality seek to entice this Court to take
on a role for which it is ill-suited. Many of Marathon’s
contentions on this point would require this Court very
nearly to substitute its judgment for that of the very
agency best equipped to deal with this nation’s problems
with competition among refiners of crude oil. See, Overton
Park v. Volpe, 401 U.S. 402, 416 (1971) (Court may not
substitute its judgment for agency’s.) Finding an adequate
basis in reason for the FEA’s regulation, the Court will
not enjoin its effectiveness as to Marathon.
It should also be noted that the Court’s own Findings
of Fact preclude injunctive relief. Marathon failed to show
that irreparable harm would surely result if an injunction
was not granted. Of course, the necessity of showing ir-
reparable harm when secking such extraordinary relief is
well established and needs no citation of authority.
Lastly, the argument that the CEP was adopted without
the proper procedures required by the Administrative Pro-
cedure Act is patently without merit. Marathon and every
other interested party had more than adequate notice and
ample opportunity to make its views known as to the FEA’s
proposed action. Clearly the Inflationary Impact State-
ment required by Executive Order No. 11,821, issued No-
vember 27, 1974 (39 Fed. Reg. 41501, November 29, 1974),
was not a prerequisite to this regulation which was pro-
posed initially on August 28, 1974.
As to Marathon’s constitutional challenge, i.e., that the
CEP constitutes a taking of property for a private purpose
ee
45a
without just compensation contrary to the Due Process
Clause of the Fifth Amendment, it is clear that this Court
is without power to decide the issue. See, § 211(¢)(2) of
the ESA. However, this Court may certify such a question
to the Temporary Emergency Court of Appeals if it finds
it to be substantial. Such a question is not substantial if it
is plainly without merit or if previous Supreme Court de-
cisions appear to foreclose the subject. See, Delaware
Valley Apartment House Owner’s Ass’n v. United States,
350 F. Supp. 1144 (E.D. Pa. 1972), aff’d 482 F.2d 1400
(T.E.C.A. 1973). :
Previous decisions of the Temporary Emergency Court
of Appeals appear to indicate that this argument is plainly
without merit. Western States Meat Packers Ass’n v.
Dunlop, 482 F.2d 1401 (T.E.C.A. 1973); Local Union No.
11, IBEW v. Boldt, 481 F.2d 1392 (T.E.C.A. 1973). Hence,
this Court finds no substantial constitutional question and
declines to certify such to the Temporary Emergency Court
of Appeals.
For all of the foregoing reasons, plaintiff’s motion for
a preliminary injunction is denied. The motion to certify
a constitutional question is also denied. The cause is con-
tinued for such further proceedings as may be necessary.
Ir Is SO ORDERED.
/s/ Nicuotas J. WALINSKI
United States District Judge
Toledo, Ohio.
January 31, 1975.
In conformity with Rule 77 (d) F.R.C.P. please take
notice that the following order of judgment was entered
in this court on January 31, 1975.
Mark Schlachet, Clerk
46a
Regulations Involved
10 C.F.R. § 211.62 contains the following definitions:
> * > - = . > * . *
** Adjusted crude oil receipts’? means the crude oil re-
ceipts of a refiner in a particular month the composition of
which has been adjusted to reflect any invoice which is
received in that month for crude oil (including crude oil
sold under § 211.65) delivered to that refiner in any pre-
vious month (excluding, however, months prior to No-
vember 1974), and which has the effeét of increasing or
decreasing the volume of old oil received by that refiner
in such previous month. ,
** Adjusted national old oil supply ratio’? means, for a
particular month, the volume of old oil included in the
aggregate adjusted crude oil receipts for all refiners, ex-
pressed as a percentage of the sum of (a) the total volume
of the « ‘ude oil runs to stills for all refiners for that month
and (b) thirty percent (80% ) of the total volume of eligible
imports by eligible firms for that month. Such volume of
old oil shall be decreased by a number of barrels of old
oil equal to the number of entitlements issuable to small
refiners under § 211.67(e).
‘Crude oil receipts’? means, as to a particular refiner,
the volume of crude oil (a) booked into its refineries in
accordance with accounting procedures generally accepted
and consistently and historically applied by the refiner eon-
cerned, for its own account or for the account of a firm
other than a refiner or (b) if not previously so booked into
its refineries, delivered by that refiner for its account to
another refiner pursuant to a processing agreement with
that other refiner. Crude oil receipts shall not include erude
oil received by a refiner for the purpose of processing at
its refineries for the account of another refiner. A par-
ticular crude oil receipt shall be deemed to have occurred
47a
when the related cost is booked into refinery inventory in
accordance with accounting procedures generally accepted
and consistently and historically applied by the refiner con-
cerned, whether or not such erude oil has been actually
received by that refiner, except that crude oil delivered by
one refiner to another refiner pursuant to a processing
agreement will be deemed to have been delivered by the
delivering refiner to the other refiner when the risk of loss
passes to the other refiner under the particular processing
agreement or when the crude oil is received at the refinery
of the other refiner, whichever occurs first. Crude oil which
has been added by a refiner to its inventory and which is
thereafter sold or otherwise disposed of without processing
for the account of that refiner shall be deducted from its
crude oil receipts at the time when the related cost is de-
ducted from refinery inventory in accordance with account-
ing procedures generally accepted and consistently and his-
torically applied by the refiner concerned. The volume of
old oil ineluded in a refiner’s crude oil receipts shall be
evidenced by and consistent with invoices received with
respect to such crude oil receipts.
‘‘Eligible firm’’ means, as to imports of eligible prod-
ucts, a firm (including a refiner) that has received, as to
the particular eligible product imported and as to the PAD
District in which the import takes place, an import alioca-
tion not subject to a license fee under section 12, 28 or 30
of Oil Import Regulation I (revision 5), as amended (32A
CFR OT Reg. 1-12, 23 and 30), or a firm which would other-
wise qualify for such an import allocation under section
12 or 30 of such Regulation if (a) that firm were in the
business in PAD District I of selling the eligible product
concerned, (b) that firm had received an allocation of im-
ports of No. 2 heating oil or No, 2-D diesel fuel in the al-
location period beginning prior to January 1, 1973, or (iii)
that firm were not a refiner and/or a petrochemical pro-
ducer.
4Sa
‘*Eligible products’’ means residual fuel oil, No. 2 heat-
ing oil and No. 2-D diesel fuel imported into the United
States, except that imports into United States customs ter-
ritory from United States possessions, territories or for-
eign trade zones shall not be considered eligible products.
‘*Entitleme:..’? means, for a particular month, the right
of a refiner owning the entitlement to include one barrel
of old oil in its adjusted crude oil receipts in such month.
The issuance and transfer of entitlements shall be evi-
denced on records maintained by the FEA.
‘‘New crude petroleum’? means new crude petroleum as
defined in § 212.72 of this chapter.
‘*No. 2 heating oil’? means heating oil grade No. 2 as
defined in American Society for Testing and Materials
(ASTM) D396-71.
‘*No. 2-D diesel fuel’? means diesel fuel grade No. 2 as
defined in American Society for Testing and Materials
(ASTM) D975-71.
“Old oil’? means old crude petroleum as defined in
§ 212.72 of this chapter.
‘Old oil supply ratio’? means, for a particular month,
the number of barrels of old oil included in a refiner’s ad-
justed crude oil receipts, expressed as a percentage of the
volume of that refiner’s crude oil runs to stills for such
month.
* * * * . * * * * .
‘*Released crude petroleum’? means released crude pe-
troleum as defined in § 212.72 of this chapter.
10 C.F.R. 5 211.66 Reporting requirements.
. * . * * * * * * *
49a
(h) Monthly report. On or prior to the twenty-eighth
day of each month, commencing with the month of Decem-
ber 1974, each refiner shall file with the FEA a report
certifying the following:
(1) The estimated volume (to the best of the knowledge
of the certifying officer of old oil included in the erude oil
receipts of that refiner for the immediately preceding
month.
(2) Any permitted or required adjustments to the esti-
mated volume of old oi! included in the crude oil receipts
of that refiner for the immediately preceding month.
(3) The volume of crude oil runs to stills of that refiner
for the immediately preceding month, taking into account,
and specifying the amount of, the adjustments provided for
in § 211.67(d).
(4) Such other information as the FEA may request.
(i) Monthly transaction report. On or prior to the tenth
day of each month, commencing with the month of Feb-
ruary 1975, each refiner and each eligible firm shall file
with the FEA a report certifying its purchases and sales
of entitlements for the third month prior to the month in
which the report is filed, except that if an eligible firm was
not issued any entitlements for a month, no filing of a trans-
action report with respect to that month shall be made.
(j) Monthly report by eligible firms. On or prior to the
twenty-eighth day of each month, commencing with the
month of December 1974, each eligible firm that has im-
ported an eligible product in the immediately preceding
month shall file with the FEA a report certifying the
following: |
(1) The identity, volume and ports of origin and entry
of any eligible products imported by that eligible firm in
the immediately preceding month.
50a
(2) Such other information as the FEA may request.
(k) Affidavit for eligible firms. Each firm that claims
to be an eligible firm shall submit to the FEA within
twenty-eight (28) days following the first month in which
that firm has imported an eligible product as to which the
issuance of entitlements is sought an affidavit setting forth
the factual basis for its claim to be classified as an eligible
firm.
10 C.F.R. § 211.67 (Dee. 4, 1974) provided as follows:
Ailocation of old oil.
(a) Issuance of entitlements. (1) For each month, com-
mencing with the month of November 1974, each refiner
shall be issued entitlements by the FEA to include in its
adjusted crude oil receipts for that month a specific num-
ber of barrels of old oil which will result in an old vil supply
ratio for that refiner equal to the adjusted national old oil
supply ratio for that month, subject to the entitlement
adjustment for small refiners set forth in paragraph (e)
of this section.
(2) Refiners to which entitlements shall be issued under
this section shall include all refiners classified as refiner-
buyers or refiner-sellers as of December 1, 1974 for pur-
poses of § 211.65. Any refiner that is not so classified, or the
refinery capacity of which is not certified by the FEA for
purposes of § 211.65, shall apply to the FEA for certifica-
tion of its refinery capacity for purposes of qualifying to
receive entitiements under this section. With respect to
the granting of any such application for certification, the
FEA shall consider the factors set forth in § 211.65(b) (v)
and (vi).
(5) For each month, commencing with the month of No-
vember 1974, each eligible firm that has imported an eligible
product in that month shall be issued a number of entitle-
ments equivalent to thirty percent (30%) of the number of
5la
entitlements that would be received by a refin (without
giving effect to the provisions of § 211.67(e)) in that month
with respect to inclusion of a number of barrels of crude
oil in that refiner’s crude oil runs to stills equal to the
number of barrels of that eligible product imported by that
eligible firm. An eligible product is imported for purposes
of this paragraph (a) (3) in the month in which the product
physically enters the United States.
(b) Required purchases of entitlements by refiners. For
each month, commencing with the month of November 1974,
each refiner that bas been issued fewer entitlements for
that month than the number of barrels of old oil included
in its adjusted crude oil receipts shall purchase a number
of entitlements effective for that month equal to the differ-
ence between the number of barrels of old oil included in
that refiner’s adjusted erude oil receipts for that month
and the number of entitlements issued to and retained by
that refiner. Entitlement purchases required under this
paragraph (b) with respect to a particular month shall
be effected by the close of the second month following that
month.
(c) Refiners and other firms with excess entitlements.
For each month, commencing with the month of November
1974, each refiner that has been issued a greater number
of entitlements for that month than the number of barrels
of old oil included in its adjusted erude oil receipts shall
sell such excess entitlements and any eligible firm (other
than a refiner) that has been issued entitlements shall sell
such entitlements.
(d) Adjustments to volume of crude oil runs to stills.
(1) A refiner’s volume of crude oil runs to stills shall (i)
inelude (A) the volume of crude oil processed by another
refiner for that refiner pursuant to a processing agreement
and (B) the volume of erude oil processed by that refiner
for a person other than a refiner pursuant to a processing
agreement, and (ii) exclude the volume of crude oil proc-
52a
essed by that refiner for another refiner pursuant to a
processing agreement.
(2) The volume of a refiner’s erude oil runs to stills for
purposes of calculating its old oil supply ratio and the
adjusted national old oil supply ratio shall be reduced by
that refiner’s volume of export sales in that month of re-
fined petroleum products (except refined lubricating oils),
including sales to a domestic purchaser which certifies the
product is for export.
(e) Entitlement adjustment for small refiners. In addi-
tion to the number of entitlements issuable under para-
graph (a) of this section, each small refiner with a daily
average volume of crude oil runs to stills of less than
175,000 barrels for a particular month shall be issued addi-
tional entitlements for each day of that month equal to
the number of barrels obtained by applying the following
applicable percentage to the daily average volume of that
small refiner’s crude oil runs to stills for that month; (i)
for daily average volumes of erude oil runs to stills of
100,000 to 175,000 barrels, the applicable percentage is ob-
tained by multiplying the difference between the reported
daily average volume of crude oil runs to stills (in thou-
sands of barrels) and 175 by a factor of .0101; (ii) for
daily average volumes of crude oil runs to stills of 30,000
to 100,000 barrels, the applicable percentage is obtained
by multiplying the difference between the reported daily
average volume of crude oil runs to stills (in thousands
of barrels) and 100 by a factor of .0214, and by adding
76% to the resulting percentage; (iii) for daily average
volumes of crude oil runs to stills of 10,000 to 30,000 bar-
rels, the applicable percentage is obtained by multiplying
the difference between the reported daily average volume
of crude oil runs to stills (in thousands of barrels) and 30
by a factor of .506, and by adding 2.26 to the resulting per-
centage; and (iv) for daily average volumes of crude oil
53a
runs to stills of zero to 10,000 barrels, the applicable per-
centage is 12.38%.
(f) Transactions under § 211.65. (1) Each sale by a re-
finer-seller under § 211.65 shall be decmed to include a vol-
ume of old oil proportionate to the volume of old oil in-
eluded in that refiner-seller’s crude oil receipts (in the
PAD Districts or District the erude oil deliveries in which
determine the price of the sale) in the month in which the
sale is made. Any volumes of old oil so ineluded in any sale
under § 211.65 shali be included in the crude oil receipts
of the refiner-buyer concerned. As to each such sale, each
refiner-seller shall eevtify to the refiner-buyer the vo.ume
of old oil included in the volume of crude oil sold within
twenty-five (25) days following the month in which the
crude oil is delivered to or for the account of the refiner-
buyer in accordance with the provisions of § 212.131 of
part 212.
(2) In determining the weighted aver* “e price of all
erude oil delivered to a refiner-seller i month in the
specified PAD District or Districts pursuant to § 212.94
of part 212, the cost of any required purchases or revenues
from any sales of entitlements by that refiner-seller shall
not be taken into account.
(g) Exchange of crude oil. In any exchange of crude oil
in which only quality and location differentials are given
effect in the caleulation of the exchange ratio, or in any
matching purchase and sale transaction which has the
same effect as such an exchange, no volumes of old oil shall
be deemed to have been transferred. Any volumes of old
oil delivered pursuant to any such exchange or transaction
shall be considered as having been retained by the refiner
that has exchanged away or sold such volume, regardless
of the volume of erude oil received or purchased by that
refiner in such an exchange or transaction.
5ta
(h) Averaging of crude oil receipts. Upon application
by a refiner in accordance with the procedures established
under Subpart G of Part 205 of this chapter within twenty
(20) days following the close of 2 month, the FEA may
adjust the crude oil receipts of that refiner for that month
to permit the portion of such erude oil receipts specified
by the FEA to be included in the erude oil receipts of that
refiner for one or more subsequent months, if the volume of
crude oil receipts in that month is significantly dispropor-
tionate to the volume of that refiner’s erude oil runs to
stills for that month due to shutdowns or other mechanical
failures resulting in a fifty percent (50) or greater portion
of that refiner’s refinery capacity not having been operable
for the duration of that month.
(i) Issuance and transfer of entitlements. (1) The first
month with respect to which entitlements shall be issued js
November 1974. The entitlements for the month of Novem-
ber 1974 shall be issued by the FEA on January 10, 1975,
pursuant to the notice specified in subparagraph (2) below.
As to each month subsequent to November 1974, FEA shall
issue entitlements pursuant to a notice published 40 days
after the close of that month.
(2) Each notice published by the FEA evidencing the
issuance of entitlements under this section shall specify
as to a particular month the adjusted national old oil
supply ratio, the name of each refiner and other eligible
firm to which entitlements have been issued, the number of
entitlements issued to each such refiner or other firm, the
number of barrels of old oil included in each refiner’s ad-
justed crude oil receipts and the price at which or price
range within which entitlements shall be sold.
(3) No transfer of an entitlement shall be effective if
made to (i) any person other than a refiner, or (ii) any
Se
Da
refiner that is not purchasing such entitlement to fulfill
such refiner’s obligations under paragraph (b) of this
section.
(4) The price at which entitlements shall be sold and
purchased shall be fixed by the FEA for each month. Such
price may be fixed in terms of a price range in which en-
titlement transactions shall be effected or in terms of a
single price at which all entitlement transactions shall take
place. Such price or price range shall be fixed by the FEA
with reference to the differential between the weighted
average prices for old oil and the weighted average prices
of new and released crude petroleum, imported crude oil
and erude oil produced from stripper wells.
(j) Failure to consummate transactions. The FEA may
direct refiners that have not purchased the required num-
ber of entitlements under paragraph (b) of this section
for a particular month to purchase such required number
of entitlements at a price specified by the FEA from any
refiner or eligible firm that has entitlements for such month
available for sale. The FEA may direct refiners or eligible
firms that have entitlements available for sale to sell such
entitlements at a price specified by the FEA to refiners
that have not purchased their required number of entitle-
ments under paragraph (b) of this section.
(k) Certification of old oil by non-refiners. Within
twenty (20) days following each month commencing with
the month of November 1974, each person other than a
refiner that has delivered crude oil to a refiner for process-
ing for the account of such person pursuant to a processing
agreement in that month shall certify to that refiner the
volume of old oil contained in the crude oil so delivered
to that refiner.
(1) Adjustments to product costs —(1) Refiners. The
cost of entitlements purchased in a particular month pur-
suant to this section by refiners shall be added to the cost
d6a
of crude petroleum purchased or landed in that month
(which is the period ‘‘t’’ (the month of measurement), for
purposes of calculating the increased costs to be applied
to product prices in the following month under the ‘‘A’”’
factor of the general formulae of § 212.83(c)(2) of this
chapter). The sales revenues from entitlements sold in a
particular month pursuant to this section by refiners shall
be subtracted from the cost of evude petroleum or eligible
product purchased or landed in that month (which is the
period ‘‘t’’ (the month of measurement), for purposes of
calculating the increased costs to be applied to product
prices in the following month under § 211.83(c) of this
chapter) as follows:
(i) The sales revenues from entitlements which are is-
sued for crude oil which are sold in a particular month
shall be subtracted from the total cost of crude petroleum
purchased or landed in that month (which is the period
‘*t’’ (the month of measurement), for purposes of caleu-
lating the increased costs to be applied to all product prices
in the following month under the ‘‘A,”’ factor of the gen-
eral formulae of § 212.83(c)(2)).
(ii) The sales revenues from entitlements which are
issued for residual fuel oil which are sold in a particular
month shall be subtracted from the total cost of residual
fuel oil purchased or landed in that month (which is the
period ‘‘t’? (the month of measurement), for purposes of
calculating the increased costs to be applied to prices of
covered products other than special products under the
‘*Bit’’ factor of the formula for covered products other
than special products of § 212.83(¢) (2) (ii)).
(iii) The sales revenues from entitlements which are
issued for No. 2 heating oil or No. 2-D diesel fuel which
are sold in a particular month shall be subtracted from the
total cost of No. 2 heating oil or No. 2-D diesel fuel pur-
chased or landed in that month (which is the period “t’’
(the month of measurement), for purposes of calculating
57a
the increased costs to be applied to prices for special prod-
ucts where (i=1) under the ‘‘Bit’’ factor of the general
formula of § 212.83(c)(2)(i) for special products where
(i=1)). F
(2) Resellers and Retailers. The sales revenues from en-
titlements sold pursuant to this section by resellers or re-
tailers shall be subtracted from the cost of the product in
inventory for which the entitlements were issued, so as to
reduce the weighted average unit cost of that product in
inventory computed pursuant to § 212.92 of this chapter.
(3) Use of eligible products entitlements by refiners to
which they are issued. A refiner that is issued entitlements
with respect to eligible products shall account for the use of
those entitlements to include old oil in its erude oil reeeipts
as if it had purchased such entitlements so as to incur an
increased cost of crude oil pursuant to subparagraph (1)
above and as if it had sold such entitlements so as to reduce
its cost of the eligible product for which the entitlements
were issued, pursuant to subparagraphs (1)(ii) and (1)
(iii) of this paragraph.
(4) Timing. The date of purchase or sale of entitlements
for purposes of determining the date on which a cost or a
cost reduction is incurred under 4 212.83(c) or § 212.93 of
this chapter shall be the date on which the transaction is re-
ported to have taken place on the monthly transaction re-
port filed with the FEA under paragraph (i) of § 211.66.
Drective oF January 10, 1975
Allocation of Old Oil; Entitlement Notice
Pursuant to the authority of the Emergency Petroleum
Allocation Act of 1973, Pub. L. 93-159, the Federal Energy
Administration has established the Old Oil Entitlements
Program, and in accordance with the provisions of 10 CFR
211.67, the notice specified in § 211.67(i) is hereby pub-
lished.
5Sa
Based on reports submitted to FEA by refiners and eligi-
ble firms as to crude oil receipts, crude oil runs to stills and
eligible product imports for November 1974 and an applica-
tion of the entitlement adjustment for small refiners pro-
vided in 10 CFR 211.67(e), the adjusted national old oil
supply ratio for November 1974 is caleulated to be .4105.
The issuance of entitlements for the month of November
1974 to refiners and eligible firms is set forth as an Appen-
dix to this notice. The Appendix lists the name of each re-
finer and other eligible firm to which entitlements have been
issued, the number of entitlements issued to each such re-
finer or other firm, and the number of barrels of old oil in-
cluded in each refiner’s adjusted crude oil receipts.
Pursuant to 10 CFR 211.67(i)(4) and as fixed by FEA
notice (39 FR 4310& December 10, 1974), the price at which
entitlements issued for the month of November 1974 shall be
sold and purchased will be $5. In accordance with 10 CFR
211.67(b), each refiner that has been issued fewer entitle-
ments for the month of November 1974 than the number of
barrels of old oil included in its adjusted crude oil receipts
is required to purchase a number of entitlements for the
month of November 1974 equal to the difference between the
number of barrels of old oil included in that refiner’s ad-
justed crude oil receipts for that month and the number of
entitlements issued to and retained by that refiner. Refiners
which have been issued a number of entitlements for the
month of November 1974 in excess of the number of barrels
of old oil included in the adjusted ernde oil receipts for No-
vember 1974, and eligible firms which have been issued en-
titlements for November 1974, shall seli such excess entitle-
ments to refiners required to purchase entitlements.
The listing of entitlement issuances contained in the Ap-
pendix reflects the application of Special Rule No. 3 (39 FR
43814, December 19, 1974) which operates to relieve certain
small refiners from the requirement to purchase entitle-
ments for the first 30,000 barrels per day of their daily
59a
average volume of crude oil runs to stills for the month
of November 1974. Accordingly, for those small refiners
whose purchase requirements were totally exempted pur-
suant to Special Rule No. 3, the Appendix specifies issuance
of an incremental number of entitlements equa! te the num-
ber such refiners would have otherwise been required to
purchase. The total number of entitlements so exempted
from the purchase requirements of 10 CFR 211.67(b) is
4,187,997. A factor of .7675 has been applied to the number
of entitlements available for sale by each refiner and eligi-
ble firm, which has the effect of reducing the total number
of entitlements available for sale by an amount equal to
the total purchase requirements exempted pursuant to Spe-
cial Rule No. 3.
;
Refiners which have reported no volumes of old oil re-
ceipts and erude oil runs to stills for November 1974, and
eligible firms which have filed reports indicating no eligible
product imports for this month have not been included in
the listing contained in the Appendix.
The total volume of entitzements required to be pur-
chased and sold under this notice is 13,825,979.
Entitlement purchases required under 10 CFR 211.67(b)
for the month of November must be effected by January 31,
1975. On or prior to February 10, 1975, each refiner and eli-
gible firm which has been issued entitlements for November
shall file with FEA the monthly transaction report specified
in 10 CFR 211.68(i) certifying its purchases and sales of
entitlements for the month of November. FEA will mail
monthly transaction report forms for November 1974 to re-
porting firms in January 1975. Refiners and eligible firms
which have been unable to locate firms for required entitle-
ment transactions by January 25, 1975 may contact FEA at
902-634-7610 to obtain assistance in locating a firm with out-
standing purchase or sale requirements. For refiners and
eligible firms that have failed to consummate entitlement
~ sueduoy [IO 4eqPpeg
10 CFR 211.67(j).
Issued in Washington, D.C., January 10, 1975.
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74a 75a
entitlements issued to and retained by that refiner.
Entitlement purchases required under this paragraph
(b) with respect to a particular month shall be effected
10 C.F.R. § 211.67, as amended by 39 Fed. Reg. 44710, 40
Fed. Reg. 6768, 10445, 13303, 14738, 28447, 40818, provides
as follows:
Allocation of Old Oj
(a) Issuance of entitlements.
(1) For each month, commencing with the month of
November 1974, each refiner shall be issued entitle-
ments by the FEA to include in its adjusted crude oil
receipts for that month a specific number of barrels
of old oil which will result in an old oil supply ratio for
that refiner equal to the adjusted national old oil sup-
ply ratio for that month, subject to the entitlement
adjustment for small refiners set forth in paragraph
(e) of this section.
(2) Refiners to which entitlements shall be issued
under this section shall include all refiners classified
as refiner-buyers or refiner-sellers as of December 1,
1974 for purposes of § 211.65. Any refiner that is not
so classified, or the refinery capacity of which is not
certified by the FEA for purposes of § 211.65, shall
apply to the FEA for certification of its refinery ca-
pacity for purposes of qualifying to receive entitle-
ments under this section. With respect to the granting
of any such application for certification, the FEA shall
consider the factors set forth in § 211.65(b)(v) and
(vi).
(b) Required purchases of entitlements by refiners.
For each month, commenci:¢ with the month of No-
vember 1974, each refiner that has been issued fewer
entitlements for that month than the number of bar-
rels of old oil included in its adjusted erude oil receipts
shall purchase a number of entitlements effective for
that month equal to the difference between the number
of barrels of old oil ineluded in that refiner’s adjusted
erude oi] receipts for that month and the number of
by the close of the second month following that month.
(c) Refiners and other firms with excess entitle-
ments. For each month, commencing with the month of
November 1974, each refiner that has been issued a
greater number of entitlements for that month than
the number of barrels of old oil included in its ad-
justed crude oil receipts shall sell such excess entitle-
ments and any eligible firm (other than a refiner) that
has been issued entitlements shall sell such entitle-
ments.
(d) Adjustments to volume of crude oil runs to
stills.
(1) A refiner’s volume of crude oil runs to stills
shall (i) inelude (A) the volume of crude oil processed
by another refiner for that refiner pursuant to a proc-
essing agreement and (B) the volume of crude oil
processed by that refiner for a person other than a
refiner pursuant to a processing agreement, and (ii)
exclude the volume of crude oil processed by that re-
finer for another refiner pursuant to a processing
agreement.
(2) The volume of a refiner’s crude oil runs to stills
for purposes of calculating its old oil supply ratio and
the adjusted national old oil supply ratio shall be re-
duced by that refiner’s volume of export sales in that
month of refined petroleum products (except refined
lubricating oils), including sales to a domestic pur-
chaser which certifies the product is for export.
(3) The volume of a refiner’s crude oil runs to stills
in a particular month for purposes of calculating its
old oil supply ratio and the adjusted national old oil
76a
supply ratio shall include the total number of barrels
of plant condensate and the total number of barrels of
synthetic crude oil made from tar sands which are
imported from Canada and are utilized in that month
as inputs to distillation units by a refiner, measured in
accordance with the Bureau of Mines Form 6-1300-M.
Neither plant condensate nor synthetic crude oil made
from tar sands which are imported from Canada shall
be eligible for inclusion in the volume of a refiner’s
crude oil runs to stills under this subparagraph (3)
unless payment has been made in accordance with
Presidential Proclamation No. 3279 of any import li-
cense fees applicable to crude oil as defined for pur-
poses of this section, which is imported for refining.
(e) Entitlement adjustment for small refiners. In
addition to the number of entitlements issuable under
paragraph (a) of this section, each small refiner with
a daily average volume of crude oil runs to stills of
less than 175,000 barrels for a particular month shall
be issued the following number of additional entitle-
ments for each day of that month: (1) for each small
refiner with a daily average volume of crude oil runs
to stills of 100,000 to 175,000 barrels, 1,258 entitlements
less the number of entitlements obtained by multiply-
ing the difference between that small refiner’s daily
average volume of crude oil runs to stills (in thou-
sands of barrels) and 100 by 16.7733; (2) for eaeh
small refiner with a daily average volume of crude oil
runs to stills of 30,000 to 100,000 barrels, 1,690 entitle-
ments less the number of entitlements obtained by mul-
tiplving the difference between that small refiner’s
daily average volume of crude oil runs to stills (in
thousands of barrels) and 30 by 6.1714; (3) for each
small refiner with a daily average volume of crude oil
runs to stills of 10,000 to 30,000 barrels, 1,238 entitle-
ments plus the number of entitlements obtained by
multiplying the difference between that small refiner’s
———
77a
daily average volume of crude oil runs to stills (in
thousands of barrels) and 10 by 22.6; and (4) for each
small refiner with a daily average volume of crude oil
runs to stills of zero to 10,000 barrels, 123.8 entitle-
ments for each 1,000 barrels of that small refiner’s
daily average volume of crude oil runs to stills.
(f) Transactions under § 211.65. (1) Each sale by a
refiner-seller under § 211.65 shall be deemed to include
a volume of old oil proportionate to the volume of old
oil included in the deliveries of crude oil to that refiner-
seller that determine the price at which the sale is
made under 4 212.94 of part 212. Any volumes of old
oil so included in any sale under § 211.65 shall be re-
flected in the crude oil receipts of the refiner-buyer
concerned. As to each such sale, each refiner-seller shall
certify to the refiner-buyer the volume of old oil in-
cluded in the volume of crude oil sold within twenty-
five (25) days following the month in which the crude
oil is delivered to or for the account of the refiner-
buyer in accordance with the provisions of § 212.131
of part 212.
(2) In determining the weighted average price of
all crude oil delivered to a refiner-seller in a month
in the specified PAD District or Districts pursuant to
§ 212.94 of part 212, the cost of any required purchases
or revenues from any sales of entitlements by that re-
finer-seller shall not be taken into account.
(¢) Exchanges of crude oil. In any exchange of
crude oil in which only quality and location differen-
tials are given effect in the calculation of the exchange
ratio, or in any matching purchase and sale transac-
tion which has the same effect as such an exchange, no
volumes of old oil shall be deemed to have been trans-
ferred. Any volumes of old oil delivered pursuant to
any such exchange or transaction shall be considered
as having been retained by the refiner that has ex-
78a
changed away or sold such volume, regardless of the
volume of crude oil received or purchased by that re-
finer in such an exchange or transaction.
(h) Averaging of crude oil receipts. Upon applica-
tion by a refiner in accordance with the procedures
established under Subpart G of Part 205 of this chap-
ter within twenty (20) days following the close of a
month, the FEA may adjust the crude oil receipts of
that refiner for that month to permit the portion of
such crude oil receipts specified by the FEA to be in-
cluded in the crude oil receipts of that refiner for one
or more subsequent months, if the volume of crude oil
receipts in that month is significantly disproportionate
to the volume of that refiner’s crude oil runs to stills
for that month due to shutdowns or other mechanical
failures resulting in a fifty percent (50%) or greater
portion of that refiner’s refinery capacity not having
been operable for the duration of that month.
(i) Issuance and transfer of entitlements. (1) The
first month with respect to which entitlements shall be
issued is November 1974. The entitlements for the
month of November 1974 shall he issued by the FEA
on January 10, 1975, pursuant to the notice specified
in subparagraph (2) below. As to each month subse-
quent to November 1974, FILA shall issue entitlements
pursuant to a notice published 40 davs after the close
of that month.
(2) Each notice published by the FEA evidencing
the issuance of entitlements under this section shall
specify as to a particular month the adjusted national
old oil supply ratio, the name of each refiner and other
eligible firm to which entitlements have been issued,
the number of entitleinents issued to each such refiner
or other firm, the number of barrels of old oil ineluded
in each refiner’s adjusted crude oil receipts and the
79a
price at which or price range within which entitlements
shall be sold.
(3) No transfer of an entitlement shall be effective
if made to (i) any person other than a refiner, or (ii)
any refiner that is not purchasing such entitlement to
fulfill such refiner’s obligations under paragraph (b)
of this section.
(4) The price at which entitlements shall be sold
and purchased shall be fixed by the FEA for each
month. Such price may be fixed in terms of a price
range in which entitlement transactions shall be ef-
fected or in terms of a single price at which all entitle-
ment transactions shall take place. Such price or price
range shall be fixed by the FEA with reference to the
differential between the weighted average costs to re-
finers of old oil and of new and released crude petro-
leum, imported crude oil and crude oil produced from
stripper well leases.
(5) Refiners and eligible firms shall correet any er-
rors contained in reports filed pursuant to paragraphs
(h) and (j) of § 211.66 by filing an amended report for
the particular month, Based on any reporting errors
so corrected, FEA in its discretion may adjust entitle-
ment issuances to the refiner or eligible firm in a month
or months subsequent to the month in which the
amended report is filed with the FILA, by issuing fewer
entitlements than the number otherwise issuable or by
requiring the refiner or eligible firm to purchase en-
titlements in order to correct for excess entitlements
issued in a prior month or by issuing entitlements over
and above the number otherwise issuable to compen-
sate for too few entitlements having been issued in
such prior month. Amended reports setting forth cor-
rections which would result in adjustments favorable
to a refiner or eligible firm shall be filed no later than
the 28th day of the second month following the month
80a
in which the report being corrected is required to be
filed. Refiners and eligible firms which seek corrections
in their favor subsequent to the two month period al-
lowed for filing amended reports may apply to FEA
for an exception from the provisions of this subpara-
graph in accordance with the procedures established in
subpart D of part 205 of this chapter. All entitlement
issuances or purchase requirements shall give effect to
any differential between the entitlement price for the
month in which any correction is reflected as compared
with the entitlement price for the month as to which
the reporting error was made and such other factors
as the FEA deems appropriate.
(6) Notwithstanding the provisions of paragraph
(i) of < 211.66, eligible firms which failed to report any
volumes of eligible products imported for the month of
November or December, 1974 and which were other-
wise eligible to receive entitlements in accordance with
the provisions of this subpart in effect with respect to
those months may report those volumes of eligible
products on or before February 28, 1975. Any volumes
so reported to the FEA shall be reflected, to the extent
determined by FEA after consideration of such fac-
tors as it deems appropriate, in the entitlement issu-
ances to those eligible firms either for the month of
December 1974 (if the amended report reflecting the
correction has been filed with the FIA by February 3,
1975) or for January 1975.
(j) Failure to consummate transactions. The FEA
may direct refiners that have not purchased the re-
quired number of entitlements under paragraph (b)
of this section for a particular month to pure ‘hase such
required number of entitlements at a price specified
by the FEA from any refiner or eligible firm that has
entitlements for such month available for sale. The
FEA may direct refiners or eligible firms that have
~ Oe es ee Mi ee de, ee ee ek A ee tne Ot eet eo
8la
entitlements available for sale to sell such entitlements
at a price specified by the FEA to refiners that have
not purchased their required nwnber of entitlements
under paragraph (b) of this section.
(k) Certification of old oil by non-refiners. Within
twenty (20) days following each month, commencing
with the month of November 1974, each person other
than a refiner that has delivered crude oil to a refiner
for processing for the account of sueh person pursuant
to a processing agreement in that month shall certify
to that refiner the volume of old oil contained in the
crude vil so delivered to that refiner.
(1) Adjustments to Crude Oil Costs. (1) Computa-
tions. (i) Entitlements purchased. The cost of entitle-
ments purchased in a particular month pursuant to
this section by refiners shall be added to the cost of
crude oil purchased or landed in that month (which is
the period **t’’ (the month of measurement), for pur-
poses of caleulating the increased cost to be applied to
product prices in the following month under the ‘* A‘?
factor of the general formulae of § 212.82(¢)(2) of this
chapter) ; provided, that, to the extent that the obliga-
tion of a refiner to purchase entitlements is reduced by
volumes of crude oil processed by a refiner for a firm
other than that refiner pursuant to a processing agree-
ment, and that the monetary value of that reduced
purchase obligation is used to reduce the processing
fee otherwise payable by that firm under the process-
ing agreement, or is otherwise passed on to that firm,
such monetary value may also be added by that refiner
to its cost of crude petroleum purchased or landed in
that month, but shall be subtracted from the cost of
crude oil purchased or landed in that month by the firm
to which the monetary value of the reduced purchase
obligation is passed on pursuant to this paragraph.
82a
(ii) Entitlements sold. The sales revenues from en-
titlements sold in a particular month pursuant to this
section by refiners shall be subtracted from the cost of
crude oil purchased or landed in that month (which is
the period **t’’ (the month of measurement), for pur-
poses of calculating the increased costs to be applied
to all product prices in the following month under the
**A ''? factor of the general formulae of § 212.83(¢)(2)
of this chapter); provided, that, to the extent that the
sales revenues from entitlements which are issued for
volumes of crude oil processed by a refiner for a firm
other than that refiner pursuant to a processing agree-
ment are used to reduce the processing fee otherwise
payable by that firm under the processing agreement,
or are otherwise passed on to that firm, such sales rev-
enues shall not be subtracted by that refiner from its
cost of erude petroleum purchased or landed in that
month, but shall be subtracted from the cost of crude
oil purchased or landed in that month by the firm to
which the entitlement sales revenues are passed on
pursuant to this paragraph.
(2) Timing. The date of purchase or sale of entitle-
ments for purposes of determining the date on which a
cost or a cost reduction is incurred under § 212.83(¢) of
this chapter shall be the date on which the transaction
is reported to have taken place on the monthly trans-
action report filed with the FEA under paragraph (i)
of © 211.66,
a
el Ne cay i 0
— on
83a
COMPANION CASES
TEMPORARY EMERGENCY COURT OF APPEALS
OF THE UNITED STATES
No. DC-34
Cities Service Company anv Crrres Service Ov. Company,
Plaintiff s-A ppellants,
Guir Om Corporation, Exxon Corporation, Maratnon Ou.
Company anv Hunt Or Company, Amici Curiae,
v.
Fepera Exercy ApMINISTRATION AND FRANK G, Zarp,
Defendants-A ppellees,
and
Asutanp Om, Ixc., Amicus Curiae.
(Firep December 31, 1975)
Appeal from the United States District Court
for the District of Columbia
(Civ. 75-0653)
Before Curistensen, Estes, and Jounson, Judges.
Estes, Judge.
This suit was commenced in the United States District
Court for the District of Columbia by Cities Service Com-
pany and its wholly-owned subsidiary Cities Service Oil
Company (Cities Service), plaintiffs-appellants, to obtain
injunctive relief from all or part of their purchase obli-
gations under the Old Oil Entitlements Program,’ 10 CFR
* Cities Service sought to enjoin the imposition or enforcement
of any entitlement purchase obligations based on its refining more
old oil than the national average or, in the alternative, to enjoin
the imposition or enforcement of any entitlement purchase obliga-
tions based on its refining its own old oil production.
Sta
§ 211.67 (Entitlements Program), 39 FR 42,246 (Dee. 4,
1974), and a declaratory judgment that the actions of the
Federal Energy Administration,? et al. (FEA), defend-
ants-appellees, in promulgating the Entitlements Program
were unlawful on the grounds that such actions were: in
excess of the agency’s statutory authority; arbitrary, ca-
pricious, and an abuse of discretion; not in accordance
with the governing statute; and an unconstitutional bur-
den on the plaintiffs.’
Cities Service based these contentions on its allegations
that the program fails to physically allocate any crude
oil or set the prices for such oil; that Cities Service is
unable to pass through its increased costs under the pro-
gram on a dollar-for-dollar basis as mandated by section
4(b)(2)(A) of the Emergency Petroleum Allocation Act
* Congress established the Federal Energy Administration under
the Federal Energy Administration Aet of 1974, 88 Stat, 97, 15
U.S.C. § 761 (1975 Supp.), ‘‘to assure a coordinated and effective
approach to overcoming energy shortages. .. .’’ 15 U.S.C. § 761(b).
* Pursuant to 10 CFR § 205 Subpart D, Cities Service filed an
application with the Office of Exceptions and Appeals of the FEA
for exception relief from the Entitlements program for purchase
obligations arising out of the erude oil runs to stills made by
Cities Service in November, Cities Service Company, Case No. FEE
1443 (filed 2-7-75, decided 2-20-75), 3 CCH Energy Management
£ 83,043. Subsequently, Cities Service filed an application for com-
plete exception relief from the Entitlements program for the dura-
tion of the regulations’ existence, Cities Service Company, Case
No. FEE 1459 (filed 2-13-75, decided 3-27-75), 3 CCH Energy
Management © 53,100, Both applications for relief were denied by
the FEA. Under 10 CFR § 205.58 and § 205.100(b), a party ag-
grieved by an order issued by the FEA under, inter alia, 10 CFR
$205 subpart D, has not exhausted its administrative remedies
until an appeal has been filed pursuant to 10 CFR § 205, subpart
If, and an order granting or denying the appeal has been issued.
Cities Service filed an appeal from the Febrnary 20, 1975 decision
of the FEA, which was also denied. Cities Service Company, Case
No. FEA 0885 (filed 3-24-75, decided 4-8-75), 3 CCH Energy
Management © 80,568.
Je ee
Da
of 1973, 87 Stat. 628, as amended, 15 U.S.C. § 753(b) (2) (A)
(1975 Supp.); that the classification of buyers and sellers
under the program lacks a rational basis; the program
causes further market distortions; that the small refiner
bias is arbitrary and capricious; that under the program
Cities Service is required to make cash payments to its
refiner-competitors which is not mandated by the Alloca-
tion Act and constitutes an unconstitutional taking of
property for private purposes without just compensation
prohibited by the Fifth Amendment, and that the pro-
gram is an unconstitutional tax prohibited by Article I,
See. 8, cl. 1 of the Constitution.
On July 10, 1975, the district court consolidated the
hearing on plaintiffs’ motion for a preliminary injunction
with a plenary hearing on the merits; denied the plain-
tiffs injunctive relief; refused to certify plaintiffs’ consti-
tutional claims, finding them insubstantial and without
merit;‘ and entered judgment for the defendants. Cities
Service Company, et al. v. FEA, et al. (D.D.C. CA No.
75-653, July 10, 1975), 3 CCH Energy Management
| 26,024. Most of plaintiffs’ contentions were rejected by
the district court for the reasons three district courts had
held that FEA’s Entitlements program was authorized by
the governing statute and the constitutional questions pre-
sented were without merit. Exron Oil Company v. F.E.A.
*Under section 211(c) of the Economie Stabilization Act of
1970, 84 Stat. 799, as amended (Stabilization Act), 12 USC § 1904
note (1975 Supp.), as incorporated into the Allocation Act by
section 5(a)(1) thereof, 15 USC § 754(a)(1) (1975 Supp.), in any
action where the district court determines that a substantial con-
stitutional issue exists, the court must certify such issue for reso-
lution by the Temporary Emergency Court of Appeals. As the
district court stated, citing Delaware Valley Apartment House
Owners’ Ass'n v. U.S., 350 F.Supp. 1144 (E.D.Pa. 1972), aff'd,
482 F.2d 1400 (TECA 1973): “‘[s]uch [constitutional] questions
are not substantial if they are plainly without merit or if previous
Supreme Court decisions appear to foreciose the subject.’’ 3 CCH
Energy Management § 26,024 at p. 26,224.
san
(DN CA ‘ 75.7 ’ | } 1%, »). ' ’ i ’ tion it oy wari thy, ; ] : t] \) ' }
cyl Iris | ! vif i ht \ 4 ( { li emey ries oT TE iz i] | ‘ 1
nt \J ( ‘ . 4 1) ij ; ‘) f / / | ‘ ric | try re ners j | 7 , . { "
(\ \) {)] ( \ : , ‘ ' b.fde tf i] hu re wimMe;rs co le / ‘ | ? ’
Management © 26,015, d lack of jurisdiction prices, rather than fron tie h t)
16 F.2d 13897 (TECA, 1970 CCL Bnet Management 7 nes. Thus, the erent « rity hot '
| ; te
’ yt) ( f ( / f | 1 rs , Cony) roll ad nad 1) ry teed oy i] 0 4 j ]
(W.D.Pa. 1975), 3 CCH Ener Manag t © 26,014, d equal impact on all refiners *° and, contrary to other obj
or lack oO! ull achiction, bd (TECA fix : , ¢} \ Those tion \ et _ ' | ‘ . ’ . | |
Slip Opi on No t) lune MO, Tao Notes It app il (A) (1) econom!l distortion ’ niertleren vith the com
filed in 1 court by Cities Service n July 18, 1975 petitive viability of the small and independent sectors of
Exxon, Marathon, and Gulf, respectively, have filed the petroleum industry, and inequitable prices to consum
briefs in support of ( aa Ser ’s nosition ers developed in certain areas of the country under the
two-tier system due to the var ne reliance of the reo
Cities Service is an integrated petroleum company en graphic region in which they made gasoline and petroleum
ta ced i ery A | Tis orring eny nt rei? ising an } iy ]
raged in pl lucing, tra pol s, ! Pua ind product purchases cn uncontrolled domestic and imported
selling crude oil and petroleum products. A high propo oil
tion of! thy erucde oil Cities Servic refines s its own ‘‘old
Oil nrodnetion 1.0 CT Tet oil the nr Ot wi eh is controlled Seel ng to remedy this situation without los ne the hen
hy the iA fil Hpproy mately B25 under the rwo the r eficial as} ts of the two rer Tl (*; ~\ ' ii? thy | kA rT se)
- ce system, 10 CFR § 212.73.° The two-tier price system mulgated the Entitlement Program.’ The basic purpose
was upheld by this court in a comprehensive opinion di
cussing the validity and effects of the system in Consumer
f rECA Slin Op 10.7. O 4. 197 CCH I I
i 7 Sawhill F.2d rehearing en 0a) (Slip VManacement 7 96.021 at 1, O59 Dur se period Ma
Opinion No. DC-26, July 7, 1975), 3 CCH Energy Man 1972 i. a “he
wement $26,011, vacating 512 F.2d 1112 (TECA, 1975) 51 r, with the pr effect, the major it
ited on] npani had ' ' ld
The two-tier price system effectivel minin ad the I |, had nil I ! t mn? .
flationary impact of rising world-wide oil prices and pro their products than did the small and independent refiners.’ Prior
vided necessary incentives for increased domestic produc to the advent of the two-tier price system, Cities Set had higher
ighted ave rid t in the w hted avera sf
Coat of 7 ( eioinated ¢] ; er pri for all n r refiners; | I reun i 3 1 t ng
' ’ na * I \ 1 tl tion Pro mplementation of U ewo-ties “ a. os tm ; ,
ram. 6 C.F.R subpart L, 38 FR 6 (A , 197 a eS SEREOS is Se SeeepaeTe ot pve te
hes ' tery] | , j \ | ing below it ol ther major nal ft na enenden
{) : ] CFR 12, S t DD iF_R. 1924 lar 15, 1974 refine!
| | ' () he | ral KE: \dmi ty The Entitlements Program originated in a not f proposed
n J 7, 1974, pur ral E y | nistra rulemaking issued by the FEA on Aucust 28, 1974, 39 F.R. 31,650
\ i4, | L. 9 io, SS Stat. 07, lo US. (61 (19% \ 0. 1974 ng h p ie hearings re ld and
ipp over 600 colInmen
of the Entitlements Program was to spread the benefit of
access to old price controlled oil and thy burden of depen
dence on uncontrolled oil among all sectors of the petro
leum industry, all regions of the country, and among all
consumers of petroleum products, while retaining the in
centives for inereased production and anti-inflationary
measures which the two-tier price system provided.
The Entitlements Program essentially requires petro
leum refiners to shift their over-all reliance on controlled
or uncontrolled ou to a more balanced position among all
the refiners. A refiner must, under the Entitlements Pro
gram, have one entitlement for each barrel of old oil which
it refines during any month. The FRA issues a certain
number of entitlements to each refiner each month, based
on that refiner’s proportionate share of all old oil refined
on a nation-wide basis, adjusted somewhat by the small
refiner bias.’ The program thus commenced on the prem
ise that all refiners should be including an equal propor
tionate share of price controlled oil in their refinery runs
each month.
proposed rulemaking was issued by the FEA on November 7, 1974,
39 FR. 39.740 (Nov. 11, 1974), following which the FEA received
over 175 comments on the proposed rule. On November 29, 1974,
the FEA issued the Entitlements regulation in its final form. 39
FR. 42,246 (Dee. 4, 1974
This court has previously stated with regard to a small refiner
that: ‘‘Paseo, a profitable producer-refiner, operating in the pe
troleum industry, must accept its fair and equitable share of the
he benefits of the programs implementing the
Alloeatior Act which the national energy crisis necessitated
Pas Inc. v. FEA, Kod TECA Slip Opinion No, 10-7,
Oct. 14. 1975 CCH Energy Management © 26.051 at p 26 256
The small refiner bias provides additional entitlements to small
refiners in an an int hased "A designated percentage of Ca hy
small refiner’s average dai y volume of erude oil rungs to stills. 39
Sa
Kintitlement purchase obligations are imposed on a re
finery when, on the basis of information supplied to the
FEA, it has been determined that the refiner was running
more old oil as a percentage of its total crude oil refinery
runs than the national average and consequently does not
have sufficient entitlements for all of the old oil it has
refined during that month. Those refiners with less old
oil in their refinery runs than the national average would
receive more entitlements than necessary for compliance,
which they may sell to tiose refiners which have purchase
obligations under the regulations. Thus,
[bly requiring refiners and importers who sell entitle
ments to reduce their erude oil or product costs by
the amount of the entitlement sales proceeds, and al-
lowing a purchaser of entitlements to include the cost
of entitlements in its erude oil costs, the FEA basi-
eally equalized the average weighted crude oil costs
of all refiners, thereby eliminating the inequities
caused by the ‘two-tier’ pricing system.
Pasco, Ine. v. FEA, —— F.2d —— (TECA Slip Opinion
No, 10-7, Oct. 14, 1975), 3 CCH Energy Management
| 26,031, at p. 26,252, rev’g I’. Supp. (D.Wy.Dkt.
No. C75-91, Aug. 27, 1975), 3 CCH Energy Management
" 26,025.
Cities Service contends on this appeal that the Entitle
ments Program is not authorized by the Allocation Act
and is not within the FEA’s authority to allocate and spee
ify prices for erude oil, residual fuel oil and refined pe
troleum products. This contention is based upon Cities
Service’s misinterpretation of Section 4(a) of the Allo-
cation Act and a disregard of the objectives, set forth by
Congress in Section 4(b), which the regulations promul-
gated under Section 4(a) are to achieve ‘‘to the maximum
extent practicable,”’ Cities Service contends that the ob
jectives of Section 4(b) set forth goals to be accomplished
by regulations promulgated under the Allocation Act, but
90a
that those goals do not delegate any power or authority
to the FEA independent of that authority contained in
Section 4(a). It asserts that statutory goals such as ‘‘pro
tection of public health, safety and welfare ... and the
national defense’’ are too broad to constitute a grant of
any authority independent of Section 4(a).
A proper interpretation of the Allocation Act and its
; , ,
provisions 1 juires TRILION ¢ he fact that the author
’ ‘ ] 4 l
mder Sectio must be read rether with the ob
\ hich thy ‘cise of that autl rity Is LO obtain.
As stated by the Supreme Court in Richards vy. United
States, 369 U.S. 1. 11, 82 S.Ct. 585, 591 (1962) : “We believe
iT undamental that a section of a statute should not be
end olation from the Context of the whole Aet. . 9
In Mastro Plastics C yy} ration v. National Labor Rela
fon Board, 350 U.S. 270, 76 S.Ct. 349, 100 L.Ed. 309
1956). the Supnres e Court, in interpret ne Section 8(d) of
+] Nat » | I aly? Relat Orns \et.a amended, rejected **a
narrowly literal construction’’ of the statute and stated:
the ahove words are read in eomplete isolation
their context in the Act, such an interpretation is
wossible. Llowever, ‘‘In expounding a statute we must
nicl dobwv 3 . iwle sentence or meimnber of a
ntence but look to the provisions of the whole la
ind to its object and poliey.”’ I"nited States v. Bois
yre’s Hei U.S.), 8S How 113, 122, 12 L.led. 1009,
300 U.S. at 285, 76 S.Ct. at 359, 160 L.Ed. at 321. NLRB,
Lion Oil Co... 342 US. 282. 288. 77 S.Ct. 330, 1 L.Ed.2d
837 (1957): Allied Chem. & Alkali Whrs. vy. Pittsburgh
id (il ('o., 404 U.S. 157, 185, 92 S. Ct. 383, 400, 30
] 1 }
’ “7 a
Pict i I
'>
{
l li ive }
— C
hmeyve ; |
\
|
ig 1 with the
ri ! Section 7602 of the In
(‘oc }o° rizes the Internal
IRS) te rye to further its tax
| }
rp | r consis
it} rity » ¢ bre | tig OT 1)
Lon res under S n (O01, In orde
purpose oO ho ! wuries [’; ted
)/ YTS. B , (1975)
1) ito st ment of the Committee of
\lloecation Aet, Confer Report 95
628, 2 U S. Code Cor or, & Ad. News, 05 ¢ ‘one... Ist Sess. ZOSS,
2689. the ( tee stated: “The President is intended to
have full fl e and efh
people re Lin Section ’ Thus, the alloeation and
iin li} iT \ _ TloO}r ) V1 hout vitality un
, } ‘ } } oO } ‘ ; ‘ ve ‘ laet to th, ob
ives of: ss 1) 1) )
Ni || | n nui rl] f mice red bv Con-
vres s | dl I he } ng author
7 \ “( | ? | ( } ; \ { «>? erenes }? | prt 7 ~
The on ttee | led to coun price
( | llocati hority so to
oc ’ iking authorit nd respon
7 v to? rat yiiy he al ort ituation
C‘ongress intends to force the Adininistration to ration
and ha (oT) hie ) mol ¢ ile it ’ F fy |
th the objective of the Economie Stabilization Aet.’’ Con
rence | port Jo-bUs pra, 2 | S. Code Cong. & Ad.
Vev Od Ce Ist Sess, JOSS, 2702. Therefore, plaintiff's
ister 1] the bifurcation of the authority conferred
Ov thy eke \ rricle r Section L(y) tro 1} thre ohiectives of ih),
1 thei r to assert the lack of specific authority
ni! \lloe, on cet for the | tle; ents Program, 1s
unwarrante
—
‘
}
and unreasonable. The Kntitiems nts Program
92a
is clearly within the authority conferred on the FEA under
the Allocation Act.”
Cities Service further contends on this appeal that the
Mntitlements Program, 10 CFR § 211.67, as promulgated
by the FEA, violates Section 4(b)(2)(A) of the Allocation
Act by failing to provide Cities Service with an effective
means of passing through its costs resulting from the kin-
itlements Program on a dollar-for-dollar basis. The Allo-
eation Act. under Section 4(b)(2)(A) mandates that the
FEA, in promulgating its regulations, provide a dollar-for-
dollar pass-through of net increases in the cost of erude oil.
The FEA has responded to this mandate through 10 CFR
219 83(¢)(2). Under this regulation the eost of entitle-
© While it is not necessary to go further in finding authority for
the Entitlements program, we note that in Pasco, Inc. v. FEA,
supra, 3 CCH Energy Management at p. 26,258, n, 21, this court
stated that: ‘‘[t]he Committee Reports of the Senate and Ilouse
are quite enlightening on the FEA’s authority to promulgate the
Entitlements program.’’ During its consideration of the first exten-
sion of the Allocation Act, a Senate Committee stated that the Allo-
eation Act
provides ample authority for the F.E.A. to institute a system
of price equalization to provide that all segments of the indus
try benefit from lower-priced domestic oil. The Committee was
urged to amend the Act to achieve this objective but has been
assured that F.E.A. intends to institute a price equalization
program under existing authority in the immediate future.
S. Rep. No. 93-1052, Comm, on Interior and Insular Affairs, 93d
Cong., 2d Sess. at 2 (Aug. 9, 1974
Further. a House Committee Report, issued two months later,
clearly indicates the FEA’s authority
to institute a system of price equalization applicable to crude
oil. residual fuel oil and refined products to eliminate the re-
gional and competitive inequities which result from a depend-
ence upon high-cost imported oils and petroleum products. The
F.E.A.’s stated commitment to Subcommittee Chairman Mac-
donald during the hearings on this bill to move promptly on
a price equalization program has convinced the Committee
93a
ment purchases and the revenues from entitlement sales
must be added to or deducted from the cost of crude oil
purchased or landed in that month, for the purposes of eal-
culating the increased cost to be applie d to product prices
for the following month under the ‘‘ A+” factor of Section
212.835(¢)(2), which is the general product pricing formula.
Cities Service argues that because it has certain banked
!
;
i
costs which it was unable to pass through in earlier months
prior to the promulgation of the Entitlements Program, it
cannot now pass through its entitlements costs due to the
current passing through by Cities Service of these former
hanked costs. The FEA pass-through 1
vulation provides
that specific amendments to the Aet te
may prove to be unnecessary.
compel such action
H. Rep. No. 93-1443, 93d Cong., 2d Sess. at 3 (Oct. 8, 1974
Cities Service contends that such legislative reports are ‘‘sub
sequent legislative history’’ such as are proscribed by the Supreme
Court in Regional Rail Reorganization Act Cases, 419 U.S. 102, 132
1974). The Court there stated, ‘“post-passage remarks of legis
lators, however explicit, cannot serve to change the legislative intent
of Congress expressed before the Act’s passage.’’ However, in this
case the Allocation Act was directly before Congress by reason of
the expiration of the Act and the necessity of ext: nding its provi
sions as Congress saw fit. Therefore, the above reports are con
temporaneous with the Act’s extension and, further, the remarks
are not being used to indicate any different legislative intent, but
rather that intent expre ssly found by a contemporaneous construc
tion of the Act by the agency charged with administering it
Courts give great deference to the construction of an Act bv the
agency charged with administering it, and hence where Congres
sional intent congruous therewith is found to have been expressed
not subsequent to the Act’s passage but contemporaneously with
the Aect’s renewal, its pertinence to the court’s task in adjudging
the agency Ss exercise of auth rity under the Act is clear See. gen
erally, Udall v. Tallman, 380 U.S. 1 (1965); Pacific Coast Meat Job.
Ass’n, Inc. v. Cost of Living Coun., 481 F.2d 1388 (T.E.C.A. 1973
University of Southern California v. Cost of Living Coun., 472
F.2d 1065 (T.E.C.A. 1972)
94a
for the pass-through of costs other than those derived from
the Entitlements Program." However, Cities Service has,
during the first four months of 1975, passed through under
this regulation costs totaling more than their $23.9 million
of entitlement purchases ineurred over the same period of
time’? Whether or not the inereased costs which Cities
Service passed through were banked costs or entitlement
costs, the FEA pass-through regulation is clearly effective
for the purpose for which it was promulgated.’* Whether
or not Cities Service passes through its entitlement costs
in the month following their purchase, or in a much later
month, depends on business judgements which Cities Serv
ice must make. The Allocation Act does not guarantee that
all increased costs will be absorbed by the market place
without any change in the market shares of the respective
companies when they pass through such costs under section
4(b)(2)(A); rather, the Act merely mandates that an op-
portunity for the pass-through of such costs be provided.
This the FEA has done, and this court holds that the En
titlements Program does not violate section 4(b)(2)(A) of
the Allocation Act.
* Under 10 CFR § 212.83, a refiner’s increased product and non-
product COSTS may be ineluded to the extent provided in 212.83,
f base prices and allowable
in the computation under § 212.82 «
prices in ePXACOSS of the hbase prices for eovere (| produets,
‘= See lk’ inding of bac t Numbe r 25. Citi s Se rvice ws FE A ar
KF Supp. —— (D.D.C. CA No. 75-653, July 10, 1975), 2 CCH
Energy Management {26,024 at p. 26,221.
‘The district court did not, as appellant erroneously contends,
premise its finding that Cities Service had failed to show that it
eould not recover its entitlement purchase costs from the market
place on the conelusion that every dollar Cities Service recovered
during the first four months of 1975 constituted a recovery of en-
titlement purchase costs. The district court found that during the
first four months of 1975 Cities Service was passing its increased
costs through under 10 CFR § 212.83 and thus a mechanism was
clearly available by which Cities Service could have passed through
its entitlement purchase costs if it had chosen to do so,
95a
Cities Service furth
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